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Cost of Debt Calculator

After-Tax Cost of Debt (%): 0.00

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    The Cost of Debt Calculator is a useful tool for businesses and investors to assess the effective cost of borrowing. By understanding the cost of debt, companies can make informed financing decisions and evaluate the impact on overall profitability.

    Using the Cost of Debt Calculator

    1. Input the total debt amount you wish to evaluate.

    2. Enter the interest rate associated with the debt.

    3. Provide the applicable tax rate to determine the after-tax cost.

    4. Click 'Calculate Cost of Debt' to view your effective cost.

    Calculation Formula

    The formula to calculate the after-tax cost of debt is:

    After-Tax Cost of Debt = Interest Rate × (1 - Tax Rate)

    Example Calculation

    If your total debt is $50,000 with an interest rate of 5% and a tax rate of 30%, the calculation would be:

    After-Tax Cost of Debt = 5% × (1 - 0.30) = 3.5%

    Why Understanding Cost of Debt Matters

    Knowing your cost of debt helps in evaluating financing options and understanding the overall financial health of a company. It also plays a crucial role in investment decisions and risk assessments.