To solve for the **pretax cost of debt**, we typically use information from a company’s debt instruments, such as **bonds**, or from the **interest expense** and the **total amount of debt**. The **pretax cost of debt** is the rate a company pays on its debt before considering the tax savings from interest payments (tax shield). Below are the key methods to calculate it.

### Methods to Solve for Pretax Cost of Debt:

#### 1. **Using Bond Information**:
   If the company issues bonds, the **pretax cost of debt** can be approximated by the **yield to maturity (YTM)** of the bond. This is the total return anticipated on a bond if it is held until it matures, and it represents the pretax cost of debt for the company.

   - **Formula** for Yield to Maturity (YTM) for a bond:
     \[
     YTM \approx \frac{C + \frac{F - P}{n}}{\frac{F + P}{2}}
     \]
     Where:
     - \( C \) = Annual coupon payment (interest paid)
     - \( F \) = Face

Learn how to calculate the pretax cost of debt, including the method using bond yield to maturity (YTM) and interest expense. This detailed guide provides formulas and steps for financial analysis, suitable for college-level finance students.

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