Capital Structure and the Cost of Capital

19 Pages Posted: 4 Aug 2005

See all articles by Stephen A. Ross

Stephen A. Ross

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Yale University - International Center for Finance

Abstract

This article provides an intertemporal synthesis of the basic neoclassical theory of capital structure as a tradeoff between tax effects and bankruptcy costs. The latter is partially endogenized as the loss of future tax benefits and the stationary reorganization policy is considered.

JEL Classification: G300, G310, G320

Suggested Citation

Ross, Stephen A., Capital Structure and the Cost of Capital. Journal of Applied Finance (Formerly Financial Practice and Education) Journal of Applied Finance, Vol. 15, No. 1, Spring/Summer 2005, Available at SSRN: https://ssrn.com/abstract=765584

Stephen A. Ross (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Yale University - International Center for Finance

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United States

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