Author: Stewart C. MyersPublisher:
ISBN: 9781332284009
Category : Business & Economics
Languages : en
Pages : 42
Book Description
Excerpt from Taxes, Corporate Financial Policy and the Return to Investors: Comment 290-67 Professors Farrar and Selwyn have made an Important contribution to the theory of optimal capital structure. However their note does not exhaust the implications of their analysis. The purpose of this comment is, first, to push their argument somewhat further and, second, to consider the implications of their findings. The topics discussed are: Section I: Some qualifications II: Transaction costs, III: The possibility of "negative leverage," IV: An extension to capital budgeting decisions and V: Implications. Credit should be given at the outset to Professor Franco Modigliani, who first noted the possibility of negative leverage for corporations. I. A Restatement of the Argument, with Qualifications. The following discussion is restricted to Farrar and Selwyn's "Case 4," in which corporate income, personal income, and capital gains all are taxed. Several additional assumptions will be adopted in order to keep the exposition as brief and simple as possible. The first two are: 1. That net income of the hypothetical firm is not expected to 2 grow or decline over time; and 2. That the firms dividend policy is optimal - i.e., stock is always repurchased in lieu of paying cash dividends. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.