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Comparing terms is often a complicated analysis and the practical cost-of-capital of a given debt term sheet is sometimes hard to calculate.
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But beyond that, here are the top sources of anxiety: declines in consumer spending (42%), regulatory burdens (38%), the cost of health insurance benefits (33%), the growing national debt (27%), lack of available capital (21%) and federal taxes (26%).
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Even a slightly lower cost of capital is important for a business that carries a lot of debt.
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Something has to give as the debt market tightens, Kravis added, and as the cost of capital goes up, multiples come down.
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If a buyback raises the debt-to-equity ratio, it can lower the firm's overall cost of capital (because in most countries interest payments, unlike dividends, are tax deductible).
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And if banks are already paying over the odds for capital and debt, which they are, that must push up the cost and limit the availability of finance for households and businesses.
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High debt levels typically make a business unattractive for an acquisition as potential buyers have difficulty raising additional debt against the business, and the associated volatility related to the future cash flows also raises the cost of capital for acquisition.
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