A global conglomerate has a debt beta of zero. If the cost of equity is 12.23 percent, and the risk-free rate is 4.36 percent, what is the firm's pretax cost of debt?

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%