Difference between revisions of "CostCapmm"
| Line 28: | Line 28: | ||
*[[Capm]] | *[[Capm]] | ||
* [[Financial library functions]] | * [[Financial library functions]] | ||
| + | * [[media:Financial Library.ana|Financial Library.ana]] | ||
* [[Financial functions]] | * [[Financial functions]] | ||
Revision as of 20:09, 23 February 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
Example
CostCapmm(0.2,0. 35, 0.4) → 0.172
See Also
Comments
Enable comment auto-refresher