Formula for calculating pre tax cost of debt
Formula for calculating the pre tax cost of debt
Post tax cost of debt = Pre tax cost of debt x (1 - tax rate)
Hence,
Pre tax cost of debt = Post tax cost of debt / (1 - tax rate)
formula for calculating book cost of debt
How to calculate pre tax cost of debt?
A company is financed 60% by debt and 40% by equity. The pre-tax cost of debt is currently 10%. The Finance Director has stated that the weighted average cost of capital for the company is 9.6%. What is the cost of equity? Assume the tax rate is 40%. 15%. 11.4%. 12%. 9.8%.
P14-6 Calculating Cost of Debt [LO2) Waller, Inc., is trying to determine its cost of debt. The firm has a debt issue outstanding with 10 years to maturity that is quoted at 105 percent of face value. The issue makes semiannual payments and has an embedded cost (i.e. a coupon rate as an APR) of 10 percent annually Required: (a), What is the company's pre-tax cost of debt as an APR? (Do not round your l'intermediate calculations.) (Click to select)...
7. A company has a before-tax cost of common equity of 14%, pre-tax cost of debt of 6%, a cost of preferred equity of 8%, and a marginal tax rate of 34%. The current market value of the company is $150 million, with $75 million common equity, $50 million debt, and $25 million preferred equity.
Compute the weighted average cost of capital (WACC) if the pre-tax cost of debt is 5%, the cost of equity is 10%, the corporate tax rate is 38%, the market value of the firms debt is $120 million, and the market value of the firms equity is %180 million
Why do we use after-tax cost of debt but not after-tax cost of equity when calculating the weighted average cost of capital (WACC)?
Acme Corp. is financed 40% with debt. The pre-tax cost of debt is 5.8%. Equity investors require a return on their investment of 12.3%. The company's marginal tax rate is 21%. What is the weighted average cost of capital (WACC)? 9.7% 7.4% 9.2% Not enough information.
Meiston Press has a debt-equity ratio of 1.80. The pre-tax cost of debt is 9.00 percent and the cost of equity is 14.1 percent. What is the firm’s weighted average cost of capital (WACC) if the tax rate is 34 percent? 10.00 percent 8.85 percent 9.63 percent 10.88 percent
A company has a beta of 1.4, pre-tax cost of debt of 5% and an effective corporate tax rate of 20%. The weight of debt in its capital structure is 60% and the rest is equity. The current risk-free rate is 2% and the expected market return is 7.5%. What is this company's weighted average cost of capital? Answer in percent, rounded to one decimal place.