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Dec 2012(Cost of debt)

This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.

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April 13, 2023 at 2:56 pm #682591
phuongmore
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Please explain why before implementing proposal, cost of debt = 4%+0.9% and after implementing proposal. cost of debt = 4%+0.6%
Thank you.
April 13, 2023 at 4:44 pm #682601
John Moffat
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Which question from this exam are you referring to?
April 14, 2023 at 2:38 pm #682639
phuongmore
Participant
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That is the question of Coeden company.The requirement is calculate and comment on Coeden Co cost of equity and WACC before and after implementing the proposal.Thank you.
April 14, 2023 at 4:30 pm #682647
John Moffat
Keymaster
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The current debt credit rating for the bonds is BBB. The risk free rate is 4% and the credit spread for BBB rated bonds is 90 basis points.
After implementing the proposal they will improve to A+, and the credit spread for A+ rated bonds is 60 basis points.
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