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momneedinghelp
Nov 8, 2009, 12:36 PM
How do you determine external financing cost?
haider78605
Nov 8, 2009, 12:56 PM
Cost of debt financing = r(1-t) here r = rate of interest and t = tax rate. Suppose you have borrowed at 10% interest rate and the tax rate is 30% your cost of financing will be =
.1 x (1-.3) = .1 x .7 = .07 or 7%