Cost of Debt


Definition: Cost of Debt is the effective rate that a company pays on its total current debt.
Debt typically includes corporate bonds, loans and other special forms of debt.
COD can be expressed and measured in either before- or after-tax returns. Interest expenses are deductible, so after-tax cost is prefered most of the times.
COD is one of the main components of a firm's capital structure or cost of capital, as are also the cost of equity and cost of prefered stock.



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