GK
ACCOUNTING
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
The cost of debt capital is calculated on the basis of
|
|
Capital
|
|
|
Net proceeds
|
|
|
Annual Interest
|
|
|
Arumal Depreciation
|
Explanation:
Detailed explanation-1: -Once the company has its total interest paid for the year, it divides this number by the total of all of its debt. This is the company’s average interest rate on all of its debt. The after-tax cost of debt formula is the average interest rate multiplied by (1-tax rate).
Detailed explanation-2: -To calculate the cost of debt, first add up all debt, including loans, credit cards, etc. Next, use the interest rate to calculate the annual interest expense per item and add them up. Finally, divide total interest expense by total debt to get the cost of debt or effective interest rate.
Detailed explanation-3: -The cost of debt capital is calculated on the basis of Annual Interest.
There is 1 question to complete.