When estimating the cost of debt capital for the company, we are primarily interested in,
A) the cost of short-term debt.
B) the cost of long-term debt.
C) the coupon rate of the debt.
D) none of the above.

Question

Quizplus · Accepted Answer

When estimating the cost of debt capital, we focus on the cost of long-term debt rather than short-term debt because long-term debt is more representative of the company's ongoing financial obligations. The coupon rate of the debt is a factor to consider, but it is not the sole determinant of the cost of debt capital. Therefore, choice B is the best answer.

When Estimating the Cost of Debt Capital for the Company