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Dec 2012(Cost of debt)

DDinh3y ago
Please explain why before implementing proposal, cost of debt = 4%+0.9% and after implementing proposal. cost of debt = 4%+0.6% Thank you.
John MoffatJohn MoffatTutor3y ago#1
Which question from this exam are you referring to?
DDinh3y ago#2
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.
John MoffatJohn MoffatTutor3y ago#3
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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