Tutorial on how to calculate cost of debt.
Cost of Debt is the cost a company spends paying interest on its debts. Cost of debt is usually expressed as percentage. Cost of Debt is calculated as before-tax cost or after-tax cost which are the methods for calculating cost of debt. But since the interest is deductible for income taxes, the after-tax rate cost of debt is usually taken into account. In this tutorial we clearly explained on how to calculate the cost of debt.
The before and after tax returns of cost of debt can be calculated using separate formula. Click on the below links to navigate to respective pages to learn in detail.
Cost of Debt - Before-tax return
Cost of Debt - After-tax return