A THEORY OF THE FIRM'S COST OF CAPITAL

“The cost of capital is one of the most important concepts in finance. Standard procedures for calculating it make a number of simplifying assumptions that often do not hold. This book derives the cost of capital under a quite general set of assumptions. It is a very useful contribution for both practitioners and academics.”

“This book provides a very focused and thorough analysis of the firm's cost of capital. The authors use the contingent claim approach to evaluate the effect of taxes on the marginal cost of capital of the firm in a consistent and coherent way. I like this approach! ”

“The concept of the firm's cost of capital is fundamental to capital budgeting decisions in modern corporations as well as investment decisions made by professional investors. This book provides a clear and concise exposition of how to incorporate the effect of taxes into cost of capital calculations thereby providing managers and investors with a more precise tool to estimate the firm's cost of capital.”

“This book presents a clear and intuitive framework for cost of capital determination that explicitly accounts for the interactions between debt-equity level, cost of capital and firm value. A discerning practitioner should be able to use the insights from this book to analyze corporate financing decisions.”

“Estimating the cost of capital is critical for finance professionals responsible for capital budgeting decisions. This work contributes to the body of knowledge so fundamental to the practice of financial decision making today.”