Home  Journals  Financial Analytics: Science and Experience  37(79) - 2011 October

The cost and capital structure in post-Modigliani - Miller era

Available online: 19 October 2011

Subject Heading: MATHEMATICAL METHODS OF ANALYSIS IN THE ECONOMY

JEL Classification: 

After accepting more than half century back the conclusions of the theory Of Modigliani - Miller, financiers in the course of time forgot the limitations and use it without their calculation. This led to the serious divergence with the real economy. The authors remove one of the most serious limitations, connected with the assumption of perpetuity of the company and they show that the calculation of the deadline of existence of company leads to a fundamental change in the entire theory of Modigliani - Miller. The concept created by the authors allowed study the dependence of the cost of equity of the company and its weighted average cost for the first time that was impossible in principle within perpetuity theory.

Keywords: average cost of capital, cost of equity capital, Modigliani - Miller theory, modification, Brusov - Filatova theorem, perpetuity, company, finite lifetime

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ISSN 2311-8768 (Online)
ISSN 2073-4484 (Print)

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