• The cost of debt is the effective rate a company pays on its debts, such as bonds and loans.
  • The main difference between the pre-tax value of debt and the post-tax value of debt is that interest expense is not taxable.
  • Debt is one part of a company’s capital structure, and the other part is equity.
  • Calculating the cost of debt involves finding the average interest paid on all of the company’s debts.