Released: V.10, N1

R. G. Ibragimov. Capital Structure and Value of the Firm: Beyond the Assumptions of Modigliani–Miller Theorems

V.7, N4, 2009

The paper presents a generalized model of the debt financing impact on the firm’s capital structure and cost of capital, which requires substantially smaller number of initial assumptions as compared with the classical models of Modigliani–Miller and Miles–Ezzell. It shows that wellknown corporate finance formulas to calculate the cost of capital of the levered firm are derived as a special case of the generalized model with the introduction of additional conditions.

Keywords: cost of capital, capital structure, WACC, financial model, business valuation.