Understanding Cost of Debt and Calculating WACC with an example

Cost of Debt is important to understand the yield to maturity (interest rate) on the current debt that the company owes. Understand it as the interest rate on your debt is the Cost of Debt. This formula is part of WACC (weighted average cost of capital. At the end of the video, we showcase an example using Cost of Equity, Cost of Debt including the tax shield to calculate the WACC.

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This is the 9th of 11 videos that teach Business Finance in Section 6 and is a good starting point if you are new to Finance or need a refresher.

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