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Before Tax Cost of Debt

 

Before tax cost of debt (or pretax cost of debt) usually is a standard cost of debt. When you determine the interest rate paid by the company for its debt, it is equal to debt cost before tax. However, interest expense is tax deductable (which means higher interest lowers corporate tax) and in finance after tax cost is used for calculations a lot. 

 

Read how to calculate ‘after tax cost of debt’ using ‘before tax cost of debt’ (if you don’t know how to calculate this one, read here).

 

 






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