Introduction

Ramesh K S Rao and Eric C Stevens
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Ramesh K S Rao: University of Texas at Austin, USA
Eric C Stevens: Salt Lake City, Utah, USA

Chapter 1 in A Theory of the Firm's Cost of Capital:How Debt Affects the Firm's Risk, Value, Tax Rate and the Government's Tax Claim, 2007, pp 1-4 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe cost of capital is perhaps the most fundamental and widely used concept in financial economics. Business managers and regulators routinely employ estimates of the firm's weighted average cost of capital (WACC) and the marginal tax rate (MTR) for investment decisions, rate regulation, restructuring activities, and bankruptcy valuation.1 In economics, the cost of capital and the MTR are central to the research on tax policy, regulation, and welfare analysis.2

Keywords: Cost of Capital; Marginal Tax Rate; WACC (Weight Average Cost of Capital); Debt Capacity; Leverage; Borrowing; Tax Shields (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 2007
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