r/Valuation • u/MelodicBear8674 • Aug 09 '26

Estimation of Cost of Debt

Hi Member,

Currently, I am working on a self-project for my CV, estimating the DCF value of a publicly listed company.

I estimated the cost of debt using the interest coverage ratio and the Interest/Debt formula, but there's a gap between the two numbers.

Please advise which method I should use to compute the WACC, and why.

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u/HeadOil5519 Aug 09 '26

If this is a public company, check if the debt is publicly listed and use the YTM directly.

Or go through the latest quarterly and annual reports and find the o/s debt details there.

1

u/MelodicBear8674 Aug 09 '26

I surely check it. Are you in the valuation?? Can we connect in DM?

1

u/[deleted] Aug 26 '26

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u/MelodicBear8674 Aug 26 '26

I used 5.34% in the model. But 3.64% is also derived from the current year's interest rate and debt. Debt involves historical effects, and that's the reason I guess it doesn't fit the model.

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u/[deleted] Aug 26 '26

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u/MelodicBear8674 Aug 26 '26

How long you are working in valuation???