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Finding Cost of Debt

The document summarizes ENCANA's debt into long-term and short-term categories. Total debt is $8,054. The long-term debt includes other long-term debt of $1,278 million, and publicly traded debt of $5,351 million. The short-term debt includes bankers' acceptance of $369 million and commercial paper of $1,056 million. It then calculates the weighted average cost of debt (Kd) of 4.5% and cost of debt for each category.

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51 views4 pages

Finding Cost of Debt

The document summarizes ENCANA's debt into long-term and short-term categories. Total debt is $8,054. The long-term debt includes other long-term debt of $1,278 million, and publicly traded debt of $5,351 million. The short-term debt includes bankers' acceptance of $369 million and commercial paper of $1,056 million. It then calculates the weighted average cost of debt (Kd) of 4.5% and cost of debt for each category.

Uploaded by

huga lala
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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ENCANA's Debt can be divided into two parts:

Long term debts (bonds, other long term debts, deferred taxes)


Amount Weight
1- Other long term debt 1278 0.16
2- Publically traded debt 5351 0.66

Short term debts (accounts payable, other accruals, income tax payable,short term obligations)
1- Banker's Acceptance 369 0.05
2- Commercial paper 1056 0.13

Total Debt 8,054.00

Marginal Tax 30.81%

Calculation of Kd

Kd 4.50%
1-

m obligations)

2-

3-
Calculation of rate for different category of debt

Calculation of other long term debt

Total other long term debt


Prime rate

Calculation of ICR
Operating profit
Interest expenses
Default spread as per Damaodran (2004) for existing ICR (assuming company is large cap)

Kd for other long term debt


Cost of debt (interest towards other long term debt)

Calculation of short term debt (commercial paper and bankers acceptance)

Amount
kd for short term debt (Avaerage rate as per case)
Cost of debt (interest towards short term debt)

Calculation for publically traded debt

Total publically traded debt


Total Interest paid
Intreset towards Long term debt
Interest paid toward short term debt
Interest paid towards publically traded debt

Kd publically traded debt


1278
5.25%

8.80343511
4613
524
0.35%

5.60%
71.568

1425
3.52%
50.16

5351
524
71.568
50.16
402.272

7.52%

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