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    momneedinghelp's Avatar
    momneedinghelp Posts: 5, Reputation: 1
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    #1

    Nov 8, 2009, 01:36 PM
    External Financing
    How do you determine external financing cost?
    haider78605's Avatar
    haider78605 Posts: 61, Reputation: 1
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    #2

    Nov 8, 2009, 01:56 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%
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