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In May 2015, the credit rating agencies downgraded the debt of General Motors Corporation

In May 2015, the credit rating agencies downgraded the debt of General Motors Corporation

In May 2015, the credit rating agencies downgraded the debt of General Motors Corporation to junk status. (Please provide 1-2 detailed paragraphs per answer)

a: Discuss the effect of this drop in credit status on the company's WACC

b: If you have been suing the YTM for the firm's bonds as your estimate of the cost of debt capital and you use the same estimation procedure following the downgrade, has your estimate become more or less reliable? Explain.

 
Abhinav 03-Dec-2019

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