How to calculate "Cost of Debt"?

(Pattabiraman M) #1

HI all, I am trying to calculate or at least estimate “cost of debt” so that the weighted average cost of capital and economic value add can be estimated via my stock analyzer. I know how to calculate it but find the necessary inputs (interest rate for one) is hard to get.
If I know the ‘cost of equity’, is there any way I can reduce it by a factor to arrive at the ‘cost of debt’?.
The cost of debt is linked to the RBI policy rate. I need some way to convert the policy rate for stocks of different cap and sectors. Would appreciate any thoughts and suggestions on this subject.

(Amit) #2

by Aswath Damodran.

(Pattabiraman M) #3

Thank you very much. This helps a great deal. I can make do with this. I may not able to calculate WACC with market value of E and D, but can with book value. Thanks again. Appreciate this a lot.