Cost of Debt in Case of Multiple Debts:

Sometimes more than one debt exists in a company's balance-sheet. In such cases, the cost of debt is calculated as per the weights of each individual debt and then combined together to arrive at the cost of the entire debt.

After-tax interest rate on the entire debt of the company:

Kd = 30,000/$100,000 x 15% x (1 - 0.35) + 50,000/$100,000 x 8% x (1 - 0.35) + 20,000/\$100,000 x 6% x (1 - 0.35)

= 0.3 x 9.75% + 0.5 x 5.2% + 0.2 x 3.9%

= 6.305%