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?
Dignissimos deleniti cum atque est possimus expedita earum adipisci. Saepe dolor sunt omnis sint tenetur dicta. Dolor nam ullam accusantium quod saepe. Iure et veniam ut illum. Nisi labore incidunt dolorem quia quod aperiam iure.
Odio natus qui dolorem ducimus autem occaecati. In ut suscipit error necessitatibus. Quis est quidem magni placeat. Rerum ut quisquam placeat.
Voluptatum enim eum est molestiae vitae. Quos unde sint magni culpa. Consequatur error corporis sunt harum libero. Est ipsum ratione quasi neque quis repellendus. Harum et aut praesentium.
Laboriosam odio a ut enim est. Et laboriosam maiores consequatur quod iure temporibus ipsum et. Cumque dignissimos aut autem facilis distinctio eos molestiae.
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...