Capital Structure

CAPITAL STRUCTURE ABSTRACT Over the years, numerous theories and studies on Capital structure have appeared. Modigliani and Miller laid down the foundation by being the first to theorize the issue. In 1958 they put forward their "M&M capital structure irrelevance proposition." However, with this first attempt, they failed to include important factors that could explain why daily observations of reality proved the opposite. In their response that followed in 1963, Modigliani and Miller relaxed …

…Conference Proceedings, Port Elizabeth, June, 649-671 DIAGRAMS FIGURE 1: The cost of equity and the WACC : M&M Propositions I and II with no taxes FIGURE 2: The cost of equity and the WACC : M&M Proposition II with taxes FIGURE 3: The Static theory of capital structure: The optimal capital structure and the value of the firm. FIGURE 4: The Static theory of capital structure : The optimal capital structure and the cost of capital.