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 Tax
Cost of Debt * (1-T) = Cost of Debt x (1 - Effective Tax Rate)