The Correct Formula for the Return to Levered Equity (for Finite Cash Flows with Zero Growth) with Respect to the M&E WACC

Joseph Tham () and Ignacio Velez-Pareja ()

No 1900, Proyecciones Financieras y Valoración from Master Consultores

Abstract: Abstract: In this note, we show that with respect to the Miles and Ezzell (M&E) Weighted Average Cost of Capital (WACC), the return to levered equity for finite cash flows is constant if the debt-equity ratio is constant. We assume that the reader is familiar with the M&E WACC. The expression that we derive is not new. We hope that our straightforward derivation with simple algebra makes the M&E WACC more widely known.

Keywords: M&E WACC (search for similar items in EconPapers)
Pages: 8
Date: 2005-03-07
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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:001900

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