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hello Mr Moffat,
I came across two different formulas to compute cost of irredeemable debt
1)
K=i/P+g
2)
K=i(1+g)/P + g
when is it correct to use either the first or the second formula?
Thank you
Stefano
Both formulae are nonsense and you can not have come across them for irredeemable debt!!!
The cost of irredeemable debt is Int(1-T)/P
(The second formula that you have written is the formal for the cost of equity – not debt!! There is no growth in debt interest.)
You really should watch the free lectures on calculating the cost of equity and the cost of debt.
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