hello!
out of sudden, it flashed across my mind..
do we usually use interest rate for cost of debt?
so let's say if we had 2 types of debt, one had interest rate of 10%, the other one of 20%..
then we sum up those two interest rates for cost of debt?
haha thanks !
| +117 | Is my life over after not getting GS? | 28 | 1s | |
| +70 | Best IB group on the Street | 32 | 10m | |
| +65 | Thoughts and tips on how to speak like an investment banker. | 25 | 16h | |
| +58 | BIG FOUR ARE PARADISE | 15 | 16h | |
| +48 | Tell me one good reason why Jefferies isn’t going to be a top bank in the next 5 years | 23 | 8h | |
| +36 | UBS Outlook | 28 | 1d | |
| +35 | How to deal with egotistical team? | 6 | 3d | |
| +33 | Highest Paid Bankers in Toronto? | 51 | 13h | |
| +28 | Are you “less ambitious” for having long term goals outside of NYC | 13 | 15m | |
| +26 | Very ridiculous interview feedback | 13 | 58m |
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.
Yes, you would use the interest rate on your debt as cost of debt, since this is the return which debtholders expect from lending funds.
If you have a number of debt facilities on your books, you would typically use the blended interest rate as your cost of debt.
You don't sum them up. Your cost of debt is not 30%, you might take the average of the two, so 15% if they both have equal amounts of debt outstanding
Actually, in technical terms, you should calculate the compound average of the 2 debt lines. So: Cost of debt = Interest rate A x (Debt A / Total Debt) + Interest rate B x (Debt B / Total Debt)
Aut sit sit eligendi odit vel error debitis. Incidunt dolorum similique repellendus quasi nihil hic. Rerum reprehenderit in soluta in repudiandae.
Assumenda enim odio ut. At ut amet fuga. Eos quia itaque consequuntur sapiente veniam. Amet et quibusdam assumenda. Sed id quisquam et incidunt.
Earum sint provident soluta vel culpa. Quaerat aliquam porro est.
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...