Cost of Debt Calculator

About this calculator

The cost of debt is what a company actually pays, net of taxes, to borrow money — because interest expense is tax-deductible in most jurisdictions, the effective burden of debt is lower than the stated interest rate suggests. It's calculated as after-tax cost of debt = interest rate × (1 − tax rate), reflecting the value of that 'tax shield' on interest payments.

This figure is a core input into the weighted average cost of capital (WACC), which companies use to discount future cash flows and decide whether an investment or project clears the bar for being worthwhile. Corporate finance teams, analysts, and business owners comparing debt financing against equity financing rely on the after-tax figure — not the headline interest rate — because it's the true cost that should drive capital-structure decisions.