Irredeemable debt
In this lesson, you'll learn how to calculate the cost of irredeemable debt—a key concept for CIMA and ACCA financial management papers. Irredeemable debt has no repayment date; investors receive only fixed interest payments in perpetuity, regardless of market price fluctuations.
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In this lesson
- 0:00 Understanding irredeemable debt
- 0:18 Market pricing and nominal value
- 0:27 Cost of debt formulas explained
- 0:58 Applying taxation to debt costs
- 1:21 Worked example: calculating cost of debt
- 2:32 Solution and final calculation
About this lesson
You'll discover the two essential formulas (with and without tax adjustment) and work through a practical example using Barn Company's bond issue to apply the calculation step by step. This technique is crucial for WACC calculations and appears regularly in objective tests and case study scenarios where you need to value a company's financing structure.
Duration: 3m
Transcript
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