Function wacc_prime_de

pub fn wacc_prime_de(
    r_e: Decimal,
    r_d: Decimal,
    de_ratio: Decimal,
    tax: Decimal,
) -> Decimal

WACC’(D/E) - First derivative of WACC with respect to the debt to equity ratio.

Arguments

• r_e - The Cost of Equity
• r_d - The Cost of Debt
• de_ratio - The Debt to Equity Ratio (market value where D + E = V)
• tax - The tax rate

Returns

• The first derivative of the WACC with respect to the D/E ratio.

WACC Formula

$$\mathrm{WACC} = R_e (\frac{1}{1+D/E}) + R_d (\frac{D/E}{1+D/E})(1-T_C)$$

Where:

• \(R_e\) = Cost of Equity
• \(R_d\) = Cost of Debt
• \(D/E\) = The Debt to Equity Ratio (market value)
• \(T_C)\) = The tax rate