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Management · Q426

Financial Management

Graduate and Post Graduate · Management · question 426

Q426

An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax

A.
term structure
B.
market premium
C.
risk premium
D.
cost of debt
Answer

Answer: Option D

Solution

Answer: Option D
Solution:
An interest rate which is paid by firm as soon as it issues debt is classified as pre-tax cost of debt. In most cases, this phrase refers to after-tax cost of debt, but it also means the company's cost of debt before taking taxes into account.