In determining the cost of debt, yields and prices of the firm's outstanding bonds could be used.

Question

Quizplus · Accepted Answer

The yields and prices of the firm's outstanding bonds are used to determine the cost of debt because these factors are indicative of the interest rates that the firm is paying on its debt. By analyzing the yields and prices of the bonds, analysts can calculate the average interest rate that the firm is paying and use it as a basis for determining the cost of debt.

In Determining the Cost of Debt, Yields and Prices of the Firm's