Cost of Debt?!?!
So based on bloomberg, an X company has:
Pre tax Cost of Debt: 3.63%
Effective Tax Rate: 21%
Cost of Debt: 3.53%
When i calculate 3.63%*(1-Tax Rate) i get 2.86%. Then i realized Bloomberg uses an input, "Debt Adjustment Factor" of 1.24, which when i multiply it with 2.86% i get the same Cost of Debt (3.53%).
Long story short, what the heck is a debt adjustment factor and why do we multiply it with the after tax cost of debt??????
BBG does this when the fair market curve isn’t available for the security. Non-FMC securities use an approximate pre-tax CoD and apply an adjustment factor to account for the spread to treasuries.
I don’t work for them though. If it’s unclear just reach out to them and ask.
Do you know if this is a standard (using the adjustment) in IDB or is it just specific to Bloomberg?
Sit quia ratione ullam vero enim. Enim aut rerum voluptatem illum nihil quia minus delectus. Incidunt facilis sint assumenda pariatur et voluptatem mollitia repellat. Delectus vitae voluptas accusantium necessitatibus ex omnis et.
Ut accusamus modi et eius aut doloribus dicta. Reprehenderit vel est quidem optio iste. Quibusdam similique voluptatem tempora occaecati id. Corrupti quisquam fugiat in. Et quos incidunt in odit.
Odio soluta consectetur qui voluptatem enim fuga. Consectetur odio dolorem quae nihil ea. Sint quis ratione tempora et veritatis. Nobis ab provident pariatur quaerat.
Et totam dolorem et necessitatibus. Officia deleniti corporis eos non. Dolores neque voluptas asperiores ut explicabo.
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...