ValuePickr Forum

How to calculate "Cost of Debt"?

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.

by Aswath Damodran.

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.