The tax
equivalent yield formula is used to compare the yields between a tax - free investment and a taxable investment.
Not exact matches
Now, it looks a little busy up there, but if you look at the top
formula, the tax -
equivalent yield equals your muni
yield divided by one minus your tax rate.
Well, there's a really simple
formula that you can use to calculate a tax -
equivalent yield so that you can compare the
yields on an equal basis.
To determine whether or not a tax - free bond is a better option than a taxable bond, simply apply the Tax
Equivalent Yield (TEY)
formula.
You can buy here a spreadsheet with all
formulas for estimating EV via trial and error if property value / market price is known or for estimating the value of a reversionary freehold if the appropriate
equivalent yield is known or can be assumed.
If the capital value is not known and we want to calculate it, then the market
equivalent yield or overall required IRR for comparable properties needs to be determined and inserted in the above
formula.