And if so, how? I think that it could if a company may have "over paid" on interest? But then what would the cost of debt be in this scenario?
For example, if a company owes $100 on interest for $1000 worth of debt, and if the company paid $110, would the cost of debt be -10/1000?
Thanks!
| +230 | UBS Layoffs (October 2026) | 68 | 32m |
| +109 | Do people still want to go PE? | 34 | 2h |
| +62 | Bloomberg - New UBS Investment Bankers See Smaller Pay Gain on Promotion | 15 | 13h |
| +46 | Think I'm fucking up my analyst years | 16 | 3d |
| +36 | What Differentiates the Best Analysts as AI Improves? | 10 | 4h |
| +34 | UBS Tech layoff | 16 | 56m |
| +33 | Lazard hirevue | 11 | 14h |
| +26 | Ambitious CC Student trying to break into IB | 13 | 5d |
| +22 | Cornell Club T10 Rankings (UPDATED 10/2026) | 14 | 1d |
| +19 | Quitting After First 4 months | 9 | 5m |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Hahaha, no. What you're calculating is the implied cost of debt, by taking the total interest expense and total expanding debt to get some implied rate.
1. If a firm overpays on interest, the "extra" interest would usually help pay down the principal, but it depends if this si even allowed. Details would be in the debt covenant.
2. The cost of debt for each tranche can never be negative.
Ut minus soluta accusamus aliquam tempore omnis. Perspiciatis voluptatem consectetur non qui sequi. Qui quia officia consequatur ut. Et velit quis asperiores tenetur reprehenderit possimus. Dolor nihil rerum ut.
Omnis hic et molestiae. Sit minima quam voluptates in commodi. Officia autem nesciunt tempore pariatur fugit nulla sint. Nemo vero rerum nisi sint eos.
Excepturi officiis ullam sit ad in earum. Iusto omnis provident ipsum.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...