The Cost of Capital, Corporation Finance and the Theory of Investment
Опубликовано на портале: 03-10-2003
American Economic Review.
The potential advantages of the market-value approach have long been appreciated;
yet analytical results have been meager. What appears to be keeping this line of
development from achieving its promise is largely the lack of an adequate theory
of the effect of financial structure on market valuations, and of how these effects
can be inferred from objective market data. It is with the development of such a
theory and of its implications for the cost-of-capital problem that we shall be concerned
in this paper. Our procedure will be to develop in Section I
the basic theory
itself and to give some brief account of its empirical relevance. In Section
we show how the theory can be used to answer the cost-of-capital questions
and how it permits us to develop a theory of investment of the firm under conditions
of uncertainty. Throughout these sections the approach is essentially a partial-equilibrium
one focusing on the firm and "industry". Accordingly, the "prices" of certain income
streams will be treated as constant and given from outside the model, just as in
the standard Marshallian analysis of the firm and industry the prices of all inputs
and of all other products are taken as given. We have chosen to focus at this level
rather than on the economy as a whole because it is at firm and the industry that
the interests of the various specialists concerned with the cost-of-capital problem
come most closely together. Although the emphasis has thus been placed on partial-equilibrium
analysis, the results obtained also provide the essential building block for a general
equilibrium model which shows how those prices which are here taken as given, are
themselves determined. For reasons of space, however, and because the material is
of interest in its own right, the presentation of the general equilibrium model which
rounds out the analysis must be deferred to a subsequent paper.
Материалы статьи используются в книге "Capital Budgeting Decision,
The: Economic Analysis of Investment Projects"
, Bierman H. Jr., Smidt S.