An Excel-based decision aid for evaluating financing alternatives and the marginal cost of capital
Jeffrey R. Stokes
Jayson K. Harper
For agricultural businesses, managing debt capital means choosing from among myriad sources and terms for financing for inputs, machinery, equipment, and land. Providers of debt capital, including input suppliers, equipment dealers, commercial banks, and the Farm Credit System, offer differing interest rates, rebates, points and other non-interest costs. Microsoft Excel™-based financing decision aids were developed to help agricultural decision makers evaluate options by determining the true cost of capital from supplier financing, machinery and equipment financing, and real estate purchases. These same tools were also used as a teaching aid in senior-level university courses in farm management and agricultural finance to reinforce agricultural cost of capital concepts.
Annual effective rate, Annual percentage rate, Cost of capital, Decision aid
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