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Murphy, Austin
- A Precisely Practical Measure of the Total Cost of Debt for Determining the Optimal Capital Structure and the Weighted Average Cost of Capital
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Authors
Affiliations
1 Department of Accounting and Finance, Oakland University, US
1 Department of Accounting and Finance, Oakland University, US
Source
International Journal of Financial Management, Vol 8, No 3 (2018), Pagination: 31-40Abstract
This paper develops a precise method of estimating the cost of debt to a firm that is based on standard financial theories and empirical evidence on default risk and financial distress costs. An analysis with current data on the S&P 500 demonstrates that the capital structures of large firms are consistent with the model’s simple implications.Keywords
Capital Structure, Cost of Capital, Cost of Debt.
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