Difference between revisions of "CostCapmm"
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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 | + | :Use [[File menu|File]] → '''Add Library...''' to add this library |
==Example== | ==Example== | ||
Latest revision as of 20:50, 24 May 2016
Function CostCapmm(rAllEq, nTx, dvr)
Calculates Modigliani and Miller's formula for adjusting the weighted average cost of capital for financial leverage. Modigliani and Miller's formula works for any project that is expected to:
- generate a level, perpetual cash-flow and
- support fixed permanent debt
- CostCapmm(rAllEq, nTx, dvr: Numeric)
Parameters:
- «rAllEq»
- the cost of capital under all-equity financing
- «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»
- is the debt-to-value ratio
Function definition:
rAllEq*(1 - (nTx*dvr))
Library
Financial library functions (Financial Library.ana)
- Use File → Add Library... to add this library
Example
CostCapmm(0.2,0. 35, 0.4) → 0.172
See Also
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