I am struggling to find which two discount rates to use to find WACC cost of debt. Does anyone have any tips for which discount rates to use
Redeemable debt -
For most of the time when I use discounting factor for calculating cost of debt to the company (to issuer - interest adjusted to tax rate) or return of investment (to investor - full interest) basically I like to add up 5% and subtract 5% from rate given in the question.
As an example where question says company has in issue 12% redeemable debt with 5 years.......... The discount factor I use for calculation is (12%+5%) = 17% and (12%-5%) = 7%.
Then use interpolation method to find required rate of return. This easily works for manual calculation.
Add remark if this is helpful to you.
It should do. The reason for the original question was because my first attempt at F9 I got two positive rates and I wanted a guide as to what discount rates to use.