ayaz_mahmud369

My two cents:

SFF = periodic interest (e.g. monthly) / [(1+periodic interest)^n* - 1]

This is the monthly rate, so multiply times 12 for the yearly amount. This will be the amount you add to the nominal rate for calculating WACC in the alternativce investment section.

Example: What is the pre-tax cost of debt on an amortizing loan with a rate of 6.0% requiring monthly payments with a term of 20 years?

0.005/[(1.005)^240 -1] = 0.002164 (this is monthly) x 12 = 0.025972 so the pre-tax cost of debt is actually 6.0% + 2.6% = 8.6%