journal article
LitStream Collection
The Firm's Optimal Debt-Equity Combination and the Cost of Capital
Baumol, William, J.;Malkiel, Burton, G.
doi: 10.2307/1885578pmid: N/A
Abstract I. The problem, 547. — II. Cost of capital: whose opportunity cost? 548. — III. A few formal relationships, 549. — IV. A diagrammatic approach to cost of capital, 552. — V. Transactions costs and taxes in practice, 555. — VI. A few comments on the opportunity loci, 559. — VII. Characteristics of an optimal financial structure, 561. — VIII. The real marginal cost of debt and equity, 564. — IX. A measure of the cost of capital, 567. — X. Capital as a weighted average, 569. — XI. Conclusion, 571. — Appendix A, 571. — Appendix B, 575. * This paper was completed at the Princeton University Financial Research Center. The authors wish to thank Nevins D. Baxter, Merton H. Miller and Ezra Solomon for extremely helpful comments. They are also grateful to the National Science Foundation and the Ford Foundation whose grants greatly facilitated our study. This content is only available as a PDF. Copyright, 1967, by the President and Fellows of Harvard College