When estimating the cost of debt capital for a firm, we are primarily interested in

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When estimating the cost of debt capital for a firm, we are primarily interested in determining the cost of long-term debt. This is because the cost of long-term debt represents the interest rate that the company has to pay on its outstanding debt obligations. The coupon rate of the debt is simply the stated interest rate on the bonds that the company issues, but the cost of long-term debt takes into account other factors such as the creditworthiness of the company and prevailing market conditions. The weighted average cost of capital (WACC) takes into account both the cost of debt and the cost of equity capital, but it is not the primary focus when estimating the cost of debt capital alone.

When Estimating the Cost of Debt Capital for a Firm