long term cost of capital
COST OF LONG-TERM DEBT. The cost of long-term debt is the after-tax cost of borrowing through the issuance of bonds. The proceeds of the bonds are reduced by the costs incurred to issue and sell the securities, called flotation costs.The following formula illustrates the computation of the before-tax cost of debt of a $1000 bond:hese sources of financing include long-term debt, common stock, preferred stock, and retained earnings. In this discussion we will examine the four types of capital, their relative costs, and the methods by which a Weighted Average Cost of Capital is derived for practical use.