COST ACCOUNT (COST OF CAPITAL)

This query is : Resolved

Nilay (Querist)
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22 October 2009 Cost of Debt Capital
Guide me which is correct formula of COST OF DEBT CAPITAL

1. (Int. X (1-Tax)+(RV-NP/2)) / (RV+NP/2)

OR
2. Step 1 = (Int. + (RV-NP/2)) / (RV+NP/2)
Step 2 = Step 1 ANS x (1-Tax)

Manish Soni

Manish Soni (Expert)
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22 October 2009 Correct formulae is (Int. X (1-Tax)+(RV-NP/2)) / (RV+NP/2) coz company gets deduction of interest payment and hence that is savings in the hands of the company.Thats why interest shall be taken after tax.

Nilay

Nilay (Querist)
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23 October 2009 Thanks Mr. Manish Soni

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