For the purpose of estimating the firm's cost of capital, one cannot look only at the coupon rate on the firm's existing debt.

Question

Quizplus · Accepted Answer

The cost of capital is not solely determined by the coupon rate on existing debt because it also considers the current market rates, the firm's creditworthiness, and the cost of equity, among other factors, to provide a comprehensive view of the cost of financing.

For the Purpose of Estimating the Firm's Cost of Capital