Textile Mills borrows money at a rate of 13.5%.
This interest rate is referred to as the
a. compound rate.
b. current yield.
c. cost of debt.
d. capital gains yield.
e. cost of capital.
Cost of Debt:
The cost of debt is a financial term used to define the price that a company or an individual needs to pay back for borrowing a principal amount of money. The amount of money additional to the repayment of the principal is known as interest.
Answer and Explanation:
The correct answer is the option c. cost of debt.
The cost of debt is rate of interest that a company pays on its debt obligations and liabilities such as loans or bonds. Therefore, the correct answer is letter c.
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Learn more about this topic:
from Corporate Finance: Help & ReviewChapter 8 / Lesson 7