Cost of Debt Capital Definition

The cost of debt capital is the interest to be paid to its owner.

Frequently Asked Questions

What is the cost of debt capital test?

The cost of debt capital is the interest to be paid to its owner.

Why is the cost of debt capital important?

It is important because it represents a sunk cost that must be repaid in order to maintain access to the funds borrowed. It also affects a company's profitability and financial stability.

What are examples of debt capital costs?

This can include interest on a car loan, credit card debt or even mortgage debt.

Who calculates the cost of debt capital?

The lender calculates this number after determining if it will make money by lending to you. The entity receiving the loan pays the cost of debt capital.

How can the cost of debt capital be lowered?

One way to lower the cost of debt capital is to get a better interest rate. Another way is to reduce the amount of risk associated with the loan. This can be done by improving your credit score or pledging collateral.

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