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Cost of Capital

C/F/594. Traditional view of capital structure and Modigliani and Miller theory

WORDS:
1500
DATE:
2009
PRICE:
19.99 GBP

The paper provides a review of theories on the capital structure of companies explaining the meaning of a target capital structure from the traditional perspective, and discussing the capital irrelevancy proposition introduced by Modigliani and Miller (1958). The weaknesses of their theory are highlighted discussing the key assumptions that changed Modigliani and Miller’s theory in 1962 and proved the influence of capital structure on cost of capital.

 

KEYWORDS: Modigliani and Miller, capital structure, Cost of Capital,

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