Hi Guys, Need your help… I have 2 financing proposition from 2 banks with different terms. Everything differs, nominal, interest, warrants attached… How do I determine which is cheapest? I thought of calculating cost of debt for each issue…taking the interest rate and add the different financing cost%/ term of loan… Is that right? Thanks
From a pure cost perspective (i.e., ignoring all other considerations), I’d try mapping out the cash flows under each of the two options, and calculate the IRR for each. As you are the borrower, the lower IRR will be the cheaper option.
thanks…I did that and it works