Answer:
The firm’s pretax cost of debt is 4.36%
Explanation:
For computing the firm's pretax cost of debt, we have to used the formula which is shown below:
= Risk free rate of return + Beta × market risk premium
where,
Risk free rate of return is 4.36%
Beta is 0
Market risk premium is not given
Now apply these values to the above formula
So, the answer would be
= 4.36% + 0
= 4.36%
The cost of equity is irrelevant. Thus, it is ignored in the computation part.
Hence, the firm’s pretax cost of debt is 4.36%
