Valuation

After-Tax Cost of Debt

Definition

What is After-Tax Cost of Debt?

Cost of debt adjusted for the tax effect of deductible interest where applicable.

Example in practice

A 12% debt cost with a 30% tax rate gives an 8.4% after-tax cost under the simple formula.

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The price at which an asset could trade in the market at a given time.

An estimate of an asset's underlying economic worth based on expected cash flows, assets, or earning power.

An estimate of an asset's appropriate value under specified assumptions or accounting standards.

Present value of expected cash inflows minus present value of expected cash outflows.

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