Theory Of The Firm's Cost Of Capital, A: How Debt Affects The Firm's Risk, Value, Tax Rate, And The Government's Tax Claim

by Ramesh K S Rao, Eric C Stevens

Overview

The cost of capital concept has myriad applications in business decision-making. The standard methodology for deriving cost of capital estimates is based on the seminal Modigliani-Miller analyses. This book generalizes this framework to include non-debt tax shields (e.g., depreciation), interactions between the borrowing rate and tax shields, and default considerations. It develops several new results and shows how better cost of capital and marginal tax rate estimates can be generated. The book's unified cost of capital theory is discussed with comprehensive numerical examples and graphical illustrations.This book will be of interest to corporate managers, academics, investment bankers, governmental agencies, and private companies that generate cost of capital estimates for public consumption.

Product Details

ISBN-13:	9789812569493
Publisher:	World Scientific Publishing Company, Incorporated
Publication date:	03/13/2007
Pages:	104
Product dimensions:	6.20(w) x 9.10(h) x 0.60(d)

Table of Contents

Preface     v
List of Figures     xi
List of Tables     xiii
Introduction     1
Model Setting     5
Distributional Assumptions     19
Model Solution Procedure     23
Discussion of Results     33
Extension to s x s States     45
Numerical Illustration     47
Conclusion     57
Appendix A     63
Appendix B     77
References     85