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 not indicate a ballpark interest rate the firm can expect to pay on its borrowing.

Question

Quizplus · Accepted Answer

Option D suggests seeking preliminary discussions with bankers for a ballpark interest rate to be paid on borrowing. The other three options suggest methods of estimating the cost of debt by referring to existing yields, market prices, or advice of investment bankers, but they do not directly involve seeking debt financing from a bank or consortium of banks.

All of the Following Methods Can Be Used to Estimate