A Theory of the Firm's Cost of Capital: How Debt Affects the Firm's Risk, Value, Tax Rate, and The... [Hardcover]

Ramesh K. S. Rao (Author), Eric C. Stevens (Author)

Book Description

ISBN-10: 9812569499 | ISBN-13: 978-9812569493 | Publication Date: March 12, 2007

The cost of capital concept has myriad applications in business decision-making. The standard methodology for deriving cost of capital estimates is based on the seminal Modigliani-Miller analyses. This book generalizes this framework to include non-debt tax shields (e.g., depreciation), interactions between the borrowing rate and tax shields, and default considerations. It develops several new results and shows how better cost of capital and marginal tax rate estimates can be generated. The book's unified cost of capital theory is discussed with comprehensive numerical examples and graphical illustrations. This book will be of interest to corporate managers, academics, investment bankers, governmental agencies, and private companies that generate cost of capital estimates for public consumption.

Editorial Reviews

Review

A discerning practitioner should be able to use the insights from this book to analyze corporate financing decisions. -- Prafulla Nabar, Head of Enterprise Valuation Group, Lehman Brothers, USA

A very useful contribution for both practitioners and academics. -- Franklin Allen, The Wharton School of the University of Pennsylvania, USA

This book provides a very focused and thorough analysis of the firm's cost of capital. -- Dan Galai, The Hebrew University of Jerusalem, Israel

Product Details

• Hardcover: 104 pages
• Publisher: World Scientific Publishing Company (March 12, 2007)
• Language: English
• ISBN-10: 9812569499
• ISBN-13: 978-9812569493
• Product Dimensions: 9.1 x 6.4 x 0.5 inches
• Shipping Weight: 12 ounces (View shipping rates and policies)
• Amazon Best Sellers Rank: #1,963,907 in Books (See Top 100 in Books)

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