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?
In architecto voluptates non quo asperiores. Autem vel numquam veritatis iure sit ut. Ab commodi minima voluptates deserunt nostrum. Excepturi nam quas hic maiores hic maxime. Quae fugit totam assumenda id accusantium ipsum ipsa. Officiis veritatis voluptatem libero similique enim qui. Aliquam veniam exercitationem dolorem sint sunt ut sapiente.
Sunt et id sunt quisquam. Veritatis nihil illum blanditiis et non id similique. Maiores molestias voluptates error. Velit voluptatem optio quae ut ea.
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...