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Hi Sir John*
(*sorry I just realised you are a Sir, I did not intend any disrespect on my previous posts!)I am rewatching the lectures a second time.
I have slight confusion on Chapter 6, Cost of Capital Part 2, at the 6.35 minute mark.
You have labelled the “return to investors” as “Kd=” on the screen. Is this an error? Wouldn’t that ‘Kd’ apply to the cost to the company?
separately, why is cost to the company worked out on the M.V. of the bond, and not the nominal (since they have to pay the nominal back). Is it because the M.V. theoretically equals the P.V.?
I think I understand. Kd (return to investors)= the return required by investors.
but aren’t they buying this debt on the open market (not the company itself) anyway? so why would the company care what they want?
I’m so sorry Sir. I paused the lecture to ask this question because I thought you would go on to the next topic. But my question is answered in the lecture.
There is no delete button otherwise I would have deleted this post.
I will watch the whole lecture before asking any questions next time.
Thank you!
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