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Finance and Credit

47(527) - 2012 December

Influence of inflation on capital cost and company capitalization

Vol. 18, Iss. 47, DECEMBER 2012

Available online: 21 December 2012

Subject Heading: FINANCIAL SPHERE

JEL Classification:

Brusov P.N. Doctor of Physical and Mathematical Sciences, Professor of department "Applied mathematics", the Financial University under the Government of Russian Federation
pnb1983@yahoo.com

Filatova T.V. PhD in Economics, Professor of department "Financial Management", The Financial University under the Government of Russian Federation
mfilatova@fa.ru

Orekhova N.P. PhD of Physical and Mathematical Sciences, Head of department, The Institute of Management, Business and Law
Natali_orehova@bk.ru

Brusov P.P. PhD of Physical and Mathematical Sciences, Head of department, The Southen Federal University
ppb@bmail.ru

Brusova A.P. Head of department "Financial Settlements and Risks", MTS
flowerik1@yandex.ru

In the article it is investigated influence of inflation on the cost of the capital of the company and its capitalization within Modigliani-Miller's theory and within the modern theory of cost and structure of the capital of Brusov-Filatova-Orekhova. It is shown that inflation not only increases the size of cost of own capital of the company and the average cost of the capital, but also changes their dependence on leverage. In particular, it increases the growth rate of cost of own capital of the company with leverage. Capitalization of the company, taking into account inflation decreases.

Keywords: inflation, equity capital cost, weighted average cost of capital, capital structure, company capitalization, Modigliani-Miller theory, Brusov-Filatova-Orekhova theory

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

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