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Leverage Calculator - to see if its worth it

  • Last Updated:
  • Mar 31st, 2014 3:52 pm
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Deal Addict
Apr 21, 2008
1753 posts
1902 upvotes

Leverage Calculator - to see if its worth it

Hey has anyone seen any excel worksheets/calculators to figure out if leveraging to invest is worth it?

I made one in excel but i'm questioning my results.

I considered the following: Borrowed amount, interest rate on loan, how much gain i would get by writing off interest based on marginal tax bracket, and on the gains side, i considered year over year gains, and tax implications on those gains. When i put everything together it doesnt seem to impactful.

Here are the actual numbers if someone wants to follow. I just picked random numbers for this.

Borrowed: 40,000
Years invested: 5

Interest Rate: 4.5%
Cost of interest: 9000
At 32% tax bracket, you can write off 2880.
Total cost is 6120.

For the Gains
Yearly gain: 8%
Total gain:18773.12
Taxes on Gains: 3003.70 (i just used capital gains. I know part of thise would be dividends but I couldnt find the formula to figure this out)
Total Gain: 15796.42

Gains minus total cost is $9649.42.

Did i calculate the total benifit right? Seems off. At this point, I could have just saved the interest payments of 9000 and had 9000 in 5 years with no risk at all.
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