Difference between revisions of "CostCapme"
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==Library== | ==Library== | ||
[[Financial library functions]] ([[media:Financial Library.ana|Financial Library.ana]]) | [[Financial library functions]] ([[media:Financial Library.ana|Financial Library.ana]]) | ||
| − | + | :Use '''File → Add Library...''' to add this library | |
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==Example== | ==Example== | ||
Revision as of 23:57, 23 February 2016
Function CostCapme(rOpp, rD, nTx, dvr)
Calculates Miles and Ezzell's formula for adjusting the weighted average cost of capital for financial leverage. The Miles and Ezzell formula works when the firm adjusts its future borrowing to keep debt proportions constant.
- CostCapme(rOpp, rD, nTx, dvr: Numeric)
Parameters:
- «rOpp»
- the opportunity cost of capital
- «rD»
- the expected return on debt
- «nTx»
- the net tax saving per dollar of interest paid. This is difficult to pin down in practice and is usually taken as the corporate tax rate
- «dvr»
- the debt-to-value ratio
Function definition:
rOpp - (L*rD*Tc*(1 + rOpp)/(1 + rD))
Library
Financial library functions (Financial Library.ana)
- Use File → Add Library... to add this library
Example
Costcapme(0.14, 0.08, 0.35, 0.5) → 0.1252
See Also
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