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2023 | OriginalPaper | Buchkapitel

9. A Qualitatively New Effect in Corporate Finance: Abnormal Dependence of Equity Cost of Company on Leverage

verfasst von : Peter Brusov, Tatiana Filatova, Natali Orekhova

Erschienen in: The Brusov–Filatova–Orekhova Theory of Capital Structure

Verlag: Springer International Publishing

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Abstract

Qualitatively new effect in corporative finance is discovered: decreasing of cost of equity k_e with leverage L. This effect, which is absent in perpetuity Modigliani–Miller limit, takes place under account of finite lifetime of the company at tax on profit rate, which exceeds some value T*.

At some ratios between cost of debt and cost of equity the discovered effect takes place at tax on profit rate, existing in western countries and Russia. This provides the practical meaning of discussed effect. Its accounting is important at modification of tax low and can change the dividend policy of the company.

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Vorheriges Kapitel The Role of Taxing and Leverage in Evaluation of Capital Cost and Capitalization of the Company

Nächstes Kapitel Inflation in Brusov–Filatova–Orekhova Theory and in Its Perpetuity Limit: Modigliani–Miller Theory

Brusov PN, Filatova ТV (2011) From Modigliani–Miller to general theory of capital cost and capital structure of the company. Financ Credit 435:2–8

Brusov P, Filatova T, Eskindarov M, Orehova N (2012a) Influence of debt financing on the effectiveness of the finite duration investment project. Appl Financ Econ 22(13):1043–1052CrossRef

Brusov P, Filatova T, Eskindarov M, Orehova N (2012b) Hidden global causes of the global financial crisis. J Rev Glob Econ 1:106–111

Brusov P, Filatova T, Orehova N (2013) A qualitatively new effect in corporative finance: abnormal dependence of cost of equity of company on leverage. J Rev Glob Econ 2:183–193

Brusov P, Filatova T, Orehova N (2014) Inflation in Brusov–Filatova–Orekhova theory and in its perpetuity limit – Modigliani – Miller theory. J Rev Glob Econ 3:175–185CrossRef

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Titel: A Qualitatively New Effect in Corporate Finance: Abnormal Dependence of Equity Cost of Company on Leverage
verfasst von: Peter Brusov
Tatiana Filatova
Natali Orekhova
Verlag: Springer International Publishing
Buch: The Brusov–Filatova–Orekhova Theory of Capital Structure
Print ISBN: 978-3-031-27928-7

Electronic ISBN: 978-3-031-27929-4

Copyright-Jahr: 2023
DOI: https://doi.org/10.1007/978-3-031-27929-4_9