Monday, March 15, 2010

(152)---COST OF DEBT

Cost of Debt

A company may raise debt in a variety of ways, it may borrow funds from financial institutions or public either in the form of public deposits or debentures (bonds) for a specified period of time at a certain rate of interest. A debenture or bond may be issued at par or at a discount or premium as compared to its face value. The contractual rate of interest or the coupon rate forms the basis for calculating the cost of debt.

See our next post for calculating below points
  • Debt issued at par
  • Debt issued at discount or premium
  • Tax adjustment for cost of debt
  • Calculating cost of the existing debt

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