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From Modigliani–Miller To General Theory Of Capital Cost And Capital Structure Of The Company
Research Journal of Economics, Business and ICT
View Archive Info| Field | Value | |
| Title |
From Modigliani–Miller To General Theory Of Capital Cost And Capital Structure Of The Company
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| Creator |
Brusov, Peter; Finance University
Filatova, Tatiana; Finance University Orehova, Natali; Finance University Brusov, Pavel; Finance University Brusova, Nastia; Finance University |
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| Subject |
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Perpetuity Companies, Companies With Finite Lifetime, Companies Of Arbitrary Age, Weighted Average Cost, Equity Cost, Modigliani–Miller Theory, Brusov–Filatova Theorem. G3,G30,G33 |
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| Description |
One of the serious limitations of the Modigliani–Miller theoryis the suggestion about perpetuity of the companies. We liftup this limitation and show, that the accounting of the finitelifetime of the company leads to change of the equity cost,k as well as of the weighted average cost of capital,WACC, in the presence of corporative taxes. We give arigorous proof of the Brusov–Filatova theorem, that in the absence of corporative taxes cost of company equity, , as well as its weighted average cost, WACC, do not dependon the lifetime or age of the company. We show thatperpetuity ModiglianiMiller theory underestimates the equitycost , as well as the weighted average cost of capital,WACC, and thus underestimates the financial risks, whichcould become one of the implicit reasons for the financial crisis
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| Publisher |
English Time Schools & Overseas Education
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| Contributor |
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| Date |
2011-06-07
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion Peer-reviewed Article |
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| Format |
application/pdf
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| Identifier |
http://ojs.journals.cz/index.php/RJEBI/article/view/192
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| Source |
Research Journal of Economics, Business and ICT; Vol 2 (2011)
2047-7848 2045-3345 |
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| Language |
eng
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| Relation |
http://ojs.journals.cz/index.php/RJEBI/article/view/192/196
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| Rights |
Copyright (c) 2011 Peter Brusov, Tatiana Filatova, Natali Orehova, Pavel Brusov, Nastia Brusova
https://creativecommons.org/licenses/by/3.0/ |
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