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- Title
PROBLEMS IN THE THEORY OF OPTIMAL CAPITAL STRUCTURE.
- Authors
Robichek, Alexander A.; Myers, Stewart C.
- Abstract
This paper discusses several problems in the theory of optimal capital structure for corporations. A proposal by economists F. Modigliani and M.H. Miller is referenced which suggests that the total market value of the firm is unaffected by leverage in the absence of taxes on corporate income and under the assumption of perfect markets. The authors prove the proposition that the mixture of debt does not affect the value of the firm, examining a number of the proposition's objections. The problem of optimal capital structure is looked at, focusing on corporate taxes, costs of bankruptcy, and the effects of present borrowing on future financing strategies.
- Subjects
CAPITAL structure; CORPORATE finance; MODIGLIANI, Franco, 1918-2003; MILLER, M. H.; CORPORATE profits; BUSINESS valuation
- Publication
Journal of Financial & Quantitative Analysis, 1966, Vol 1, Issue 2, p1
- ISSN
0022-1090
- Publication type
Article
- DOI
10.2307/2329989