All of the Following Methods Can Be Used to Estimate

question 108

Multiple Choice

All of the following methods can be used to estimate the cost of debt except:

• A)If the firm targets an "A" rating (or any other bond rating), a review of the yields to maturity on A-rated bonds in Standard & Poor's Bond Guide can provide an estimate of the firm's current borrowing costs.
• B)The firm can solicit the advice of investment bankers on the cost of issuing new debt.
• C)If the firm has debt currently trading, it can use public market prices and yields to estimate its current cost of debt.
• D)A firm can seek long-term debt financing from a bank or a consortium of banks; preliminary discussions with the bankers will indicate a ballpark interest rate the firm can expect to pay on its borrowing.
• E)All of the above statements are correct.

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