Wind power systems is currently able to borrow money via a bond issue at a rate of 13.5 percent per year. this interest rate is referred to as the cost of debt.
What is cost of debt?
The effective interest rate that a business pays on its obligations, such as bonds and loans, is known as the cost of debt.
A company's capital structure, which also contains equity, includes debt as one component. The capital structure of a company refers to how it uses various funding sources, including debt like bonds or loans, to support its overall operations and expansion.
Understanding the entire rate that a firm pays to employ different kinds of debt financing is made easier with the help of the cost of debt measure. Due to the fact that riskier businesses typically have higher loan costs, the metric can also provide investors with a sense of how risky the firm is in comparison to others.
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