Cost of Debt

Loading the player...

Cost of debt is the interest a company pays on its borrowings. It is expressed as a percentage rate. In addition, cost of debt can be calculated as a before-tax rate or an after-tax rate. Because interest is deductible for income taxes, the cost of debt is usually expressed as an after-tax rate. 

The formula for the cost of debt is the sum of the risk-free rate plus the credit spread times one minus the tax rate (Rf + Credit Spread)*(1 - Tax Rate). 

comments powered by Disqus
Related Articles
  1. Gross Cash Recovery (GCR)

    Gross Cash Recovery (GCR)

  2. Liquidation Differential

    Liquidation Differential

  3. Financial Action Task Force (FATF)

    Financial Action Task Force (FATF)

  4. Asset Management and Disposition Agreement (AMDA)

    Asset Management and Disposition Agreement (AMDA)

  5. International Finance Corporation

    International Finance Corporation

  6. Charging Bull

    Charging Bull

  7. International Finance

    International Finance

Trading Center