The discount rate of debt is not always the cost of debt

Assuming that the discount rate for valuing a debt equals the debt's yield is an approximation that is inconsistent with the CAPM model. The debt's yield corresponds to its internal rate of return whereas, according to the CAPM, the discount rate should only reflect the systematic risk associated with the debt's returns. Furthermore, in general default and liquidity risks will have both a systematic and an unsystematic component. Therefore these risks might only have a partial impact on the discount rate since only their systematic component should affect it.