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The cost of debt is calculated by dividing the interest expense by the result of the short-term debt added to the long-term debt.

Formula:

Cost of Debt = Interest Expense ÷ (Short Term Debt + Long Term Debt)Calculate the effective tax rate by dividing the income tax expense by the income before tax.

Formula:

Effective Tax Rate = Income Tax Expense ÷ Income Before TaxCost of Debt * (1-T) = Cost of Debt x (1 - Effective Tax Rate)

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