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What is rhye required return on debt

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Consider Rhye, amid-size pharmaceutical company. Rhye's equity has a book value of $2.8 billion and a market value of $19.4 billion. Rhye's debt, on the other hand, has a book value of $500 million and a market value of $600 million; the debt's annual interest rate and yield to maturity are 6% and 5%, respectively. Currently, Rhye has a beta of 1.2 and faces a corporate tax rate of 35%. Also currently, the yield to maturity on 10-year U.S. Treasury Notes is 2.5%. The market risk premium remains around its historical average of 5.5%.

What is Rhye's required return on debt, or cost of debt?

Reference no: EM133057397

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