Question

How can I calculate the cost of debt in part d (0.4355)?

A. Use the formula: Cost of Debt = (Interest Expense / Total Debt) × 100.
B. Use the formula: Cost of Debt = (Interest Expense / Earnings Before Interest and Taxes) × 100.
C. Use the formula: Cost of Debt = (Interest Rate / Earnings Before Interest and Taxes) × 100.
D. Use the formula: Cost of Debt = (Total Debt / Interest Rate) × 100.

Answer 1

The cost of debt can be calculated using the formula: Cost of Debt = (Interest Expense / Total Debt) × 100.

Step-by-step explanation:

The correct formula to calculate the cost of debt is:

Cost of Debt = (Interest Expense / Total Debt) × 100

In this formula, the interest expense is the amount of money paid as interest on the debt, and the total debt is the amount of debt owed by the company. By dividing the interest expense by the total debt and multiplying by 100, you can calculate the cost of debt as a percentage.