Cost of debt: Difference between revisions
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imported>Anh Nguyen m (==See also==) |
imported>Anh Nguyen m (Rewriting--Comments Welcomed) |
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The '''cost of debt''' | The '''cost of debt''' the required return by an lender for a borrowed amount. For the company, it can be seen as a cost as the interest paid on the debt is categorized as an expense. It is usually noted by <math>K_d</math>. | ||
The gross Cost of Debt can be computed as the total yearly amount of interest paid on the total amount borrowed. | |||
As interests are deductible from the tax form, the company usually take only in account the after-tax cost of debt: | |||
XXXXX | |||
The cost of debt is one of the input for the [[WACC|Weighted Cost of Capital]] which gives the cost of the capital sources, taking into account origin of it. | |||
==See also== | ==See also== | ||
Revision as of 11:17, 27 November 2006
The cost of debt the required return by an lender for a borrowed amount. For the company, it can be seen as a cost as the interest paid on the debt is categorized as an expense. It is usually noted by .
The gross Cost of Debt can be computed as the total yearly amount of interest paid on the total amount borrowed.
As interests are deductible from the tax form, the company usually take only in account the after-tax cost of debt:
XXXXX
The cost of debt is one of the input for the Weighted Cost of Capital which gives the cost of the capital sources, taking into account origin of it.