A company has outstanding long-term bonds with a face value of $1,000, a 9% coupon rate, 20 years remaining until maturity, and a current market value of $1,132. If it pays interest annually, then what is its cost of debt?
Debenture Valuation
A debenture is a private and long-term debt instrument issued by financial, non-financial institutions, governments, or corporations. A debenture is classified as a type of bond, where the instrument carries a fixed rate of interest, commonly known as the ‘coupon rate.’ Debentures are documented in an indenture, clearly specifying the type of debenture, the rate and method of interest computation, and maturity date.
Note Valuation
It is the process to determine the value or worth of an asset, liability, debt of the company. It can be determined by many processes or techniques. Many factors can impact the valuation of an asset, liability, or the company, like:
A company has outstanding long-term bonds with a face value of $1,000, a 9% coupon rate, 20 years
remaining until maturity, and a current market value of $1,132. If it pays interest annually, then what is its
cost of debt?
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