The Cost of Capital: Market Orientation and Practical Application, 36
The Advantages of Debt, 38
Risk and Debt, 40
Mathematical Optimization: Theory vs. Reality, 43
The Modigliani - Miller Propositions, 45
The Optimization Problem, 46
The Proposed Ideal and its Inherent Problems, 48
Capital Structure and the Cost of Capital, 50
The Concept of a Weighted Average Cost of Capital, 53
Earnings and Capital Structure, 55
Capital Structure Logic, 56
Changes in Capital Structure and Stock Prices, 57
Four “Postulates”, 59
Share Limitations, 60
Adapted Measurements, 61
Explicit vs. Implicit Costs, 62
Implicit Costs of Debt, 64
The Implicit Cost of Equity, 64
The Moment of Truth, 66
Appendix: The Net Operating Income Approach to Stock Valuation, 68