BFO Theory with Variable Profit in Case of Advance Payments of Tax on Profit

Peter Brusov, Tatiana Filatova and Natali Orekhova
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Tatiana Filatova: Financial University under the Government of Russian Federation
Natali Orekhova: Financial University under the Government of Russian Federation

Chapter Chapter 15 in The Brusov–Filatova–Orekhova Theory of Capital Structure, 2023, pp 291-316 from Springer

Abstract: Abstract The Brusov–Filatova–Orekhova (BFO) theory is generalized for the simultaneous account of variable company profit and advance tax on income payments. The generalized BFO formula for the WACC has been derived. The dependence of WACC, discount rate, WACC-g (here g is growth rate), company capitalization, V, the equity cost, ke, on leverage L at various values of g, on debt cost, kd, and on age of the company, n, is studied. It is shown that WACC is no longer a discount rate. This role passes to WACC-g, which decreases with g, while the company’s value increases with g. The tilt of curve k(L) growths with g. It is found that at the growth rate g

Keywords: Generalized BFO theory; Variable income; Advance tax on income payments; Company value; WACC; Cost of equity (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-27929-4_15

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DOI: 10.1007/978-3-031-27929-4_15

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