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 personal financial planners 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.

Question

Quizplus · Accepted Answer

The cost of issuing new debt cannot be accurately estimated by soliciting the advice of personal financial planners. It would be better to seek advice from investment bankers or other financial experts with knowledge of the debt market. The other options listed (A, C, and D) are all valid methods of estimating the cost of debt.

All of the Following Methods Can Be Used to Estimate