Question

What is the cost of debt before and after taxes for General Mills?

Please use current annual 10K report for the company from SEC, it will be third result on google. I don't know what information you need exactly otherwise I would copy paste it and  i'm not allowed to post links I think. Thank you!

Answer 1

Cost of debt refers to the effective rate that the company pays on its current debt. Generally it is calculated using post tax values but sometimes calculations are made using pre - tax values as well. The difference between them lies in the tabulation of interest expenses.

Cost of debt( before taxes) = Interest paid on debt / Total debt

Cost of debt( after taxes) = Interest paid on debt / Total debt * (100 - effective tax rate)

Long-term debt, excluding current portion 12,668.7

Total debt (b) 15,818.6

Interest paid 182.9

Effective income tax rate 27%

Cost of debt( before taxes) = 182.9/15818.6 = 0.01156 = 1.16%

Cost of debt( after taxes) = 1.16%* (100 - 27%) = 0.85%