Cost of debt formulas
Poulsbo Manufacturing Inc., is currently an all-equity firm that pays no taxes. The market value of firm's equity is $3 million. The cost of this unlevered equity is 15% per annum. Poulsbo plans to issue 600,000 in debt and use the proceeds to repurchase stock. The cost of debt is 4% semi-annually.
I want to figure out: Where does the formula or calculation come from that gives me a cost of debt of 8.16% in order to figure out what the cost of equity will be?© SolutionLibrary Inc. solutionlibary.com 9836dcf9d7 https://solutionlibrary.com/business/finance/cost-of-debt-formulas-3em0