Valuation

Cost of Debt

Definition

What is Cost of Debt?

The effective rate a company pays or would pay on borrowed funds.

Example in practice

The analyst uses the bond yield as a market estimate of debt cost.

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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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