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The pre-tax cost of debt for a new issue of debt is determined by

The pre-tax cost of debt for a new issue of debt is determined by

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Cost of Debt meant that the rate which is paid on a current debt by the company. It is either of two types pre-tax cost of debt and after-tax cost of debt. The only difference in the before tax and after-tax cost of debt is the interest expenses are deductible. The interest cost at which the securities of the firm were issued is the existing cost of capital. It can be derived by finding out the Yield to Maturity.

Hence, the pre-tax cost of debt for a new issue of debt is determined by the yield to maturity of outstanding bonds. Yield to maturity for the outstanding bonds.


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