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It is December 31, 2021, and your firm is considering issuing debt to invest in a project with indefinite life. The firm's current and target debt ratio is 40%. 30-Year corporate bonds with similar credit rating and time to maturity are presently offering a credit/default spread of 1.75%. You additionally have the following data available on Treasury rates: U.S. Government Interest Rates as of December 31, 2021 Maturity 1-Year 10-Year 30-Year YTM 2.73% 2.79% 3.12% Historically, 30-Year Treasuries have averaged about 4.18%, and similar corporate bonds have averaged a spread of 0.75%. Based on these data, what is your estimate of the project's cost of debt? It is December 31, 2021, and your firm is considering issuing debt to invest in a project with indefinite life. The firm's current and target debt ratio is 40%. 30-Year corporate bonds with similar credit rating and time to maturity are presently offering a credit/default spread of 1.75%. You additionally have the following data available on Treasury rates: U.S. Government Interest Rates as of December 31, 2021 Maturity 1-Year 10-Year 30-Year YTM 2.73% 2.79% 3.12% Historically, 30-Year Treasuries have averaged about 4.18%, and similar corporate bonds have averaged a spread of 0.75%. Based on these data, what is your estimate of the project's cost of debt?
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Calculate the riskfree rate The riskfree rate is the yield on a riskfree investment typically represented by the yield on a Treasury bond Based on the ... View the full answer
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Managerial economics applications strategy and tactics
ISBN: 978-1439079232
12th Edition
Authors: James r. mcguigan, R. Charles Moyer, frederick h. deb harris
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