Generalized Modigliani–Miller Theory: Applications in Corporate Finance, Investments, Taxation and Ratings

ISBN-13: 9783030938956 / Angielski

Peter Brusov; Tatiana Filatova; Natali Orekhova

Opis

The original theory of capital cost and capital structure put forward by Nobel Prize Winners Modigliani and Miller has since been modified by many authors, and this book discusses some of them. The book’s authors have created general theory of capital cost and capital structure – the Brusov–Filatova–Orekhova (BFO) theory, which generalizes the Modigliani–Miller theory to encompass companies of an arbitrary age (and arbitrary lifetime). Despite the availability of this more general theory, the classical Modigliani–Miller theory is still widely used in practice. In this book, the authors for the first time generalize it for cases of practical relevance: for the case of variable profit; for the case of advance tax-on-profit payments and interest on debt payments; for the case of several tax-on-profit and interest on debt payments per period; and for the combination of all three effects. These generalizations lead to valuable theoretical results as well as significantly widen of practical application this theory in practice and increase of the quality of finance management of the company. As well, the book investigates the applications of said results in corporate finance, investments, taxation and ratings, where employing a generalized Modigliani–Miller theory can be very fruitful.

Spis treści

Chapter 1. Introduction.- Part I. Modigliani–Miller Theory in Corporate Finance.- Chapter 2. Capital Structure: Modigliani–Miller Theory.- Chapter 3. Modern Theory of Capital Cost and Capital Structure: Brusov–Filatova–Orekhova Theory (BFO Theory).- Chapter 4. Optimal Capital Structure of the Company: Its Absence in Modigliani–Miller Theory with Risky Debt Capital.- Chapter 5. The Equity Cost in the Modigliani –Miller Theory.- Chapter 6. The Role of Taxing and Leverage in Evaluation of Capital Cost and Capitalization of the Company.- Chapter 7. Inflation in Modigliani – Miller Theory.- Chapter 8. Modification of the Modigliani–Miller Theory for the Case of Advance Tax on Profit Payments.- Chapter 9. The Modigliani–Miller Theory with Arbitrary Frequency of Payment of Tax on Profit.- Chapter 10. How Frequently Should Companies Pay Tax on Profit.- Chapter 11. Generalization of the Modigliani–Miller Theory for the Case of Variable Profit.- Part II. Applications of the Modigliani–Miller Theory in Investments.- Chapter 12. Investment Models with Debt Repayment at the End of the Project and Their Application.- Chapter 13. Investment Models with Uniform Debt Repayment and Their Application.- Chapter 14. Innovative Investment Models with Debt Repayment at the End of the Project.- Chapter 15. Investment Models with Advance Frequent Payments of Tax on Profit and of Interest on Debt.- Part III. Applications of the Modigliani–Miller Theory Ratings and Rating Methodologies.- Chapter 16. Application of the Modigliani–Miller Theory in Rating Methodology.- Chapter 17. Application of the Modigliani–Miller Theory, Modified for the Case of Advance Payments of Tax on Profit, in Rating Methodologies.- Chapter 18. A New Approach to Project Ratings.- Chapter 19. Conclusions.

O autorze

Peter Brusov is professor at the Financial University under the Government of the Russian Federation (Moscow). He has been a visiting Professor of Northwestern University (USA), Cornell University (USA), Osaka City University (Japan) and National Chung Cheng University (Taiwan) among other places. He is the author of over 500 research publications including six monographs, numerous textbooks and articles.

Tatiana Filatova is professor at the Financial University under the Government of the Russian Federation (Moscow). In the past 20 years, she has been Dean of the faculties of financial management, management, state and municipal government at the Financial University. Tatiana Filatova is the author of over 250 research publications including five monographs, numerous textbooks and articles.

Natali Orekhova is professor at the Southern Federal University in Rostov-on-Don (Russia). She been a leading scientist of the Financial University under the Government of the Russian Federation. She is the author of over 120 research publications including five monographs, numerous textbooks and articles.