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DOES THE MARKET PRICE OF DEBT DETERMINE THE COST OF DEBT

DOES THE MARKET PRICE OF DEBT DETERMINE THE COST OF DEBT

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Answer #1

The market value of debts refers to the market price investors would be willing to buy a company's debts for which differs from the value on the balance sheet. A company's debts doesn't always come in the from of publicly traded bonds, which have a specified market value. Instead,many companies own debts that can be classified as non-traded, such as bank loans.

Because this debts is reported at book value or accounting value in the financial statements, it is the analysts' responsibility to calculated the market value,which will be of major importance when calculating the company's total Enterprise Value

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