PSLmodels / Cost-of-Capital-Calculator

A cost of capital and effective tax rate calculator
https://ccc.pslmodels.org
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Fix how ACE is handed in determining the required after-tax rate of return #370

Closed jdebacker closed 1 month ago

jdebacker commented 2 years ago

Currently, calcfunctions.calc_r has:

    r = (
        f * (nominal_int_rate * (1 - (1 - int_haircut) * u)) + (1 - f) *
        (E + inflation_rate - E * ace_int_rate * ace)
        )

It should be:

    r = (
        f * (nominal_int_rate * (1 - (1 - int_haircut) * u)) + (1 - f) *
        (E + inflation_rate - ace_int_rate * ace)
        )

The ace_int_rate is a parameter representing the rate at which the costs of equity can be deducted. It's something one might compare to E, but it is not a proportion of E.

jdebacker commented 1 month ago

Resolved