Sir in this formula( first ke is cost of equity and what is other kel stand for) ke= kel+(1-T)(kel-kd)vd/ve
And when it is advisable to use this formula. Many thanks.
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modigilani and miler
11y ago#1On Page 57 of our free course notes we explain the formula!
Ke is the cost of equity when there is gearing. Kei is the cost of equity when there is no gearing.
It is relevant when the gearing changes (although you can always get to the same result using betas and the asset beta formula).
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