cost of debt computed
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How can you compute the cost of debt? Please post a couple of examples and cite your approach/formula.
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Solution Summary
The solution computes and explains the cost of debt. Examples are also provided.
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Basically, the cost of debt is the effective rate that the company pays on their current debt, and it is most commonly measured post-tax, or after-tax. The reason why most companies use the after-tax numbers to measure the cost of debt is because each debt carries interest expense that the company must pay, which is a pre-tax expense. Interest expense is an expense on the ...
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