Cost of Debt Calculator
Cost of debt is nothing but the effective rate which a firm pays on current debts of the firm. The cost of debt is calculated both before and after the tax returns. The cost of debt is calculated with the help of this below formula:where,
= Debt interest Rate
= Total tax rateLet us learn cost of debt better with the following example:Example:
Company CDE issues debt interest rate of 5%. The total tax rate is 35%. Calculate CDE's cost of debt.Solution:
Debt Interest Rate = 5%
Total Tax Rate = 35%
We know the formula to calculate cost of debt = Rd
(1 - tc
Let us input the values onto the formula = 5(1 - 0.35)
= 3.25% Hence, the cost of debt for the company CDE = 3.25%
Use our below online cost of debt calculator by inserting the debt interest rate and total tax rate onto the input boxes and then click calculate button to get the output.
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