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The after-tax cost of debt is predominantly based on marginal pretax costs, as well as marginal or statutory tax rates.
Wiki User
∙ 13y ago
Wiki User
∙ 13y ago...not debt....?
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Why does the weighted average cost of capital of firms that uses more debt capital lower that that of a firm that uses less debt capital?
Because the cost of debt is generally lower than the cost of equity. This is because in case of financial distress, debt-holders are repaid before the equity holders are, as well as because debt has the assets of the firm as collateral and equity does not.
What is a monetary cost?
Monetary cost is the cost associated with borrowing money from open market that is called interest on debt as well. Example: If company take loan from bank of 1000 on 10% then 10% of 10000, 1000 is the monetary cost or cost of debt
If All else is constant an increase in a firm's cost of debt will do what?
will result in an increase in the firm's cost of capital.
What is the firm's cost of external equity?
When a company raises new capical, normally it seeks the investment bankers for help. There are three general ways as debt, preferred stock and common stock. The interest that the banker gets is floation cost. For debt and preferred stock. it is very small, 1 percent, so we don't incorporate it into the cost of capital. But for common stock, the bankers meet higher risk, so the floation cost is higher. A firm's external equity is not its retained earnings.
What is Mexico's debt level?
Government debt can be subdivided into two categories: external debt and domestic debt. External debt is the outstanding debt owed from the Mexican government to foreign governments (such as the United States or Europe), banks, institutions and individuals. Domestic debt is the amount of debt owed to Mexican banks, institutions and individuals within the country.Mexico's government debt can be broken down as follows:External debt: US$46,208.8 million.Domestic debt: US$192,218.7 million.Total Mexican debt: US$238,427.6 million.Now, the indebtedness level is the percentage of debt compared as a percentage of the total sum of products and services sold in the country within a year (also named Gross Domestic Product - GDP). Mexico's Gross Domestic Product is valued at US$788,840 million (est. 2009).Therefore Mexico's debt level is:5.9% of its GDP in foreign debt.24.4% of its GDP in domestic debt.30.3% of its GDP for total public debt.
Difference between cost of debt and marginal cost of debt?
Cost of debt is the original cost of borrowing including original interest rate Marginal cost of debt is new loan which extended from the previous one, the interest of which is called marginal cost of debt.
How does the cost of debt differ from the cost of capital?
Cost of debt considers only the cost that goes to the debtholders. Cost of capital considers debt and equity costs both.
Why is the coupon rate a bad estimate of a firm's cost of debt?
A coupon rate is not a good estimate of a firm's cost of debt, as it is only a reflection of the firm's cost of debt when bonds were issued, not the current cost of debt. It's not representative of the yield in the current market.
If a company's debt is low does marginal cost of capital apply?
Weighted average cost of capital includes cost of debt and cost of equity. Thus irrespective of existing proportion of debt and equity, the marginal cost is always applicable.
If you have the debt assets after taxes percent of 10 percent cost of debt 8 percent and cost of equity 12 percent how is cost of capital calcuated?
WACC = Cost of Debt * Weight of Debt = + Cost of equity * Weight of Equity WAAC = .08*.10 + .12*.90 WAAC = 10.88%
The after-tax cost of debt will almost always be below?
The after-tax cost of debt will almost always be below
What can happen to your debt after your car is repossessed?
Your debt is then written off as the car covers the cost of the debt.
How do you calculate cost of dedt?
Calculate cost of debt for what??????
Is bad debt expenses considered a product cost?
Bad debt expense is a product cost, depends directly on sales.
Is cost of equity capital less than cost of debt capital?
Cost of equity > Cost of debt Reason: When u issue debt, for example in the form of bonds, u have to pay bondholders interest. This interest is tax deductible. On the other hand, when u issue equity, i.e. stocks, u pay dividends. This dividend is taxed as corporate income. Because of the ability of debt to escape taxation vis-a-vis equity, cost of debt is lower than cost of equity. In fact, this is called a debt tax shield.
How to calculate capital charge?
To calculate capital charge, you can use the formula: Capital Charge = Cost of Equity × Equity + Cost of Debt × Debt. Cost of equity is usually estimated using the Capital Asset Pricing Model (CAPM) or Dividend Discount Model (DDM), while cost of debt is based on the interest rate on debt. By multiplying the respective cost by the amount of equity and debt, you can determine the capital charge.
What is cost of perpetual debt?
sorry
