Cost of Debt
Short definition
The cost of debt (Kd) is the pre-tax all-in yield on marginal debt. It is not the historic coupon; it is the price of borrowing today. WACC uses this Kd.
Detailed explanation
Sources: a new term sheet, bond YTM, reference+spread. A stock of cheap historic coupons does not pull marginal Kd down. An FX Kd does not enter a local WACC without FX or hedge cost.
In distress, observed YTM as Kd can explode and drag WACC to a meaningless height — valuation then needs another frame.
Why it matters for the CFO
In some Turkish periods Kd approaches Ke; capital structure does not automatically slide toward “cheap debt”.
How it is calculated
Kd ≈ All-in borç maliyeti (yeni marjinal borç; tarihi kupon değil)
Variables in the formula
- Kd: Pre-tax cost of debt
How to read it
Kd sits near Rf + credit spread. A wider spread lifts WACC independently of Ke.
Numerical example
TLREF 45%, margin 6%, annualised fees 1% → Kd ≈ 52% (all-in, pre-tax).
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Definitions are educational. They are not investment, credit or tax advice.