In this lesson, Nick Palazzolo, CPA, breaks down the intricacies of the cost of debt, making sense of complex financial concepts with ease. With practical examples, he illustrates how to calculate the weighted average interest rate and the effective annual interest payments. Nick delves into the step-by-step approach for determining the pretax and after-tax cost of debt, ensuring that the concept of outflows to inflows is crystal clear. He effortlessly bridges the gap to understanding the cost of preferred stock, again emphasizing the impact of inflows versus outflows. Further enriching the lesson, Nick critiques certain financial industry practices, such as the use of basis points, advocating for transparency and simplicity in financial communications.
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