Assignment 1 BC0222 March 2017 Compatibility Mode]. Word sert Design Layout References Mailings Review View Foxit Reader PDF Q Tell me what you want to do Cost of debt with changes in the debt ritio Your task is to calculate the pre-tax cost of debt a fe Company D at different levels of the debe ratio (DDE, ranging from 0% to 90% You will start from a ser ario where the firm is unlevered CD-0), from there the debt ratio inereases. Keep total capital G395,000) unchanged throughout the exercise. To calculate the interest coverage ratio, keep EBIT unchanged at $28,200. Please fill the Exeel tables for the assignment. As the debt ratio increases, interest payments increase and the interest coverage ratio diminishes. and therefore the credit spread and the pre- This affects the eredit rating of the company, tax cost of capital. You pay special attention to the eredit ratings aa lower interest coverage ration lead to eredit downgrades- and you have to recalculate the interest expense and the credit ratio and the eredit apread Cost of Debt Additional information:the risk-free rate 2.75%. Other assumptions about Company D Gn millions): evenar coverage rating spread con delt $395,000 TOTAL CAPITAL Ratings and Spreads Rating spread