In determining the cost of debt, several factors must be considered. All of the following are those factors EXCEPT ____.

Question

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The growth rate of dividends is not a factor in determining the cost of debt. The before-tax cost of debt reflects the interest rate the firm must pay on its debt. The tax rate is important because interest payments on debt are tax-deductible, reducing the after-tax cost of debt. Flotation costs are the expenses a company incurs when issuing debt, such as underwriting fees, legal fees, and printing expenses.

In Determining the Cost of Debt, Several Factors Must Be