A Theory of the Firm's Cost of Capital

Download or read book A Theory of the Firm's Cost of Capital written by Ramesh K. S. Rao and published by World Scientific Publishing Company Incorporated. This book was released on 2007-01-01 with total page 88 pages. Available in PDF, EPUB and Kindle. Book excerpt: The cost of capital concept is widely used in business decision-making. The current theory and estimates for measurement of cost of capital are derived from the seminal Modigliani-Miller analyses. This book generalizes this framework to include non-debt tax shields (e.g., depreciation) and default considerations. It develops several new results and shows how better cost of capital and marginal tax rate estimates can be generated. The unified cost of capital theory presented in the book is illustrated graphically and with comprehensive numerical examples. This book will be of great interest to practicing managers, academics, governmental agencies and private companies that generate cost of capital estimates for public consumption.