Cost of debt is a vital enter in calculation of the weighted average price of capital. Heres the WACC formula. What is the weighted average cost of capital used for.
Thus its cost of debt is.
After-Tax Cost of Debt Pre-Tax Cost of Debt 1 tax rate Lastly equity is considered the most expensive form of financing. WACC EV x Re DV x Rd x 1-T. Once the default risk premium has been estimated it is added to an appropriate risk-free rate. Here credit spread depends on the credit rating.