In these slides we discuss the practical and conceptual difficulty of finding an Optimal Capital Structure. We propose a normative approach we call Implicit Bankruptcy Costs Theory and how to proceed to find the optimal capital structure and value with period-to-period constant and variable...

The value of debt tax shields in foundational corporate valuation models by Nobel Laureates Modigliani and Miller (MM) continues to be a controversial issue that is central to our understanding of corporate finance. This paper argues that a fundamental valuation problem exists in the MM tax...

This paper shows how to proceed to find the optimal capital structure and value with period-to-period constant and variable leverage, when the discount rate for tax shields is Ke, the cost of levered equity. Numerical procedures and recursive closed-form non-circular expressions for the...