Typically, it should be the cost of debt. Debt holders have less default risk than shareholders because they are more senior in terms of being claimants of the business.
The business can also benefit from an interest tax shield because interest is in most cases, tax deductible, which lowers the "actual" interest expense before you get to net income.
Typically, it should be the cost of debt. Debt holders have less default risk than shareholders because they are more senior in terms of being claimants of the business.
The business can also benefit from an interest tax shield because interest is in most cases, tax deductible, which lowers the "actual" interest expense before you get to net income.