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Sunday, October 23, 2011

Cost of debt

Cost of debt - You can estimate the cost of capital for listing in a manner similar to shares. It is also common revenue margins compared to other similar securities, which almost corresponds to the use of valuation ratios for equities. It is more difficult to assess the cost of capital for unlisted debt. It is also an important issue, because most of the firms, including all listed firms have large amounts of unlisted debt.

One method for estimating the cost of debt compared to return on debt is most similar listed debt. You can modify the rates for the term and riskiness. Debt can be paid back to the last that has been issued or, optionally, a value close to the value of the book, and therefore debt cost only nominal interest rate is reasonable to assume that. If it pays a variable interest rate debt and lending has been a significant change in their true riskiness.

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