Cost of Debt – Issuing and raising debt?

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    jrow
    Participant
    • Topics: 27
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    hi,

    what is the difference between a company issuing debt and when it raising debt? I thought that when a company issues redeemable debt, it offers eg. a loan and recieves the interest. why would it want to do that if it need money to fund a project now, e.g investment in machinery (as in one question). Also, it is always an IRR when redeemable?


    Profile photo of Kevin Kelly
    Anonymous
    • Topics: 1
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    Hi Irow,

    (1) Yes, as far as F9 is concerned, you should always calculate the cost of redeemable debt AFTER TAX using IRR

    (2) Issuing debt and raising debt are the same thing … they are both debt finance or bonds or loan capital. The company then pays interest + principal etc., according to the repayment details of the bond.

    (3) When a company purchases redeemable debt (buys the bonds on the stock market) it is now the Investor and so will receive an income / interest + repayment of the debt upon maturity of the debt.

    Regards, Kevin Kelly

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