Generalized Modigliani-Miller Theory: Applications in Corporate Finance, Investments, Taxation and Ratings

The original theory of capital cost and capital structure was modified by Modigliani and Miller, and this book discusses the general theory of capital cost and capital structure (BFO) theory, which generalizes the Modigliani-Miller theory to encompass companies of an arbitrary age and lifetime. It also investigates the applications of these results in corporate finance, investments, taxation, and ratings.

Format: Hardback
Length: 362 pages
Publication date: 29 March 2022
Publisher: Springer Nature Switzerland AG

The original theory of capital cost and capital structure, developed by Nobel Prize Winners Modigliani and Miller, has undergone numerous modifications and expansions by numerous authors. This book explores some of these revisions. The authors of this book have introduced a comprehensive theory of capital cost and capital structure, known as the Brusov-Filatova-Orekhova (BFO) theory, which extends the Modigliani-Miller theory to encompass companies of any age and lifetime. Despite the availability of this more generalized framework, the classical Modigliani-Miller theory remains widely employed in practice.

In this book, the authors for the first time generalize the Modigliani-Miller theory for practical applications, including cases involving variable profit, advance tax-on-profit payments, interest on debt payments, multiple tax-on-profit and interest on debt payments per period, and the combined effects of these factors. These generalizations yield valuable theoretical insights and significantly broaden the practical application of this theory. Moreover, the book delves into the applications of these results in corporate finance, investments, taxation, and ratings, where employing a generalized Modigliani-Miller theory can be highly fruitful.

By incorporating these generalizations, companies can enhance their finance management practices and improve the quality of their financial decisions. The BFO theory provides a solid foundation for analyzing capital costs and structures, enabling organizations to make informed choices that optimize their financial performance and achieve their strategic objectives.

Weight: 740g
Dimension: 235 x 155 (mm)
ISBN-13: 9783030938925
Edition number: 1st ed. 2022