If a company currently only has $200 million of bank debt at 8% coupon rate and DOES NOT plan on issuing anymore debt in the future, what amount of debt should I use in my equitycalculation?
Also, since the company doesn't have any bonds outstanding, can I just use the book value of this debt?
I know the firm's cost of debt should reflect the average future long-term cost of debt, but since the company doesn't plan on issuing any more debt in the future, should I just use the coupon rate on the existing debt?
In general, is it better to use the target capital structure or the current capital structure in market value? I know market value is the common approach, but given the volatility of the market, I feel like using market value can sometimes imply a distorted D/E ratio that is not consistent with the target capital structure.
Thank you for your input.