Home  Journals  Finance and Credit  25(505) - 2012 July

The role of taxes and leverage in evaluation of capital cost and capitalization of company

Available online: 7 July 2012

Subject Heading: FINANCE ENTERPRISES

JEL Classification: 

In the article the role of a tax board, taxes and leverage in the modern theory of corporate finance is investigated. Modigliani-Miller's theory, and also the modern theory of Brusov-Filatova-Orekhova are considered. It is shown that cost of own capital of the company and average decrease with growth of a rate of profit tax. Detailed research of dependence of the average cost of the capital of the WACC company and cost of own capital of ke from profit tax rate, from leverage level (a share of the extra capital of wd), and also research of dependence of WACC and ke from term of life of the company is carried out at various rates of profit tax and leverage levels. The concept "the tax operational lever" is presented. For the companies with final time of life a number of the important qualitative effects which do not have analogs in the perpetuation companies are found.

Keywords: tax shield, taxes, company capital cost and capital structure, company capitalization, leverage, Modigliani-Miller theory, Brusov-Filatova-Orekhova theory

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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