Inflation in Brusov–Filatova–Orekhova Theory and in its Perpetuity Limit – Modigliani – Miller Theory

Authors

  • Peter N. Brusov Financial University
  • Tatiana Filatova Financial University
  • Natali Orehova Department of Financial and Economical Technology

Keywords:

Brusov–Filatova–Orekhova theory, Modigliani – Miller theory, inflation

Abstract

In this paper the influence of inflation on capital cost and capitalization of the company within modern theory of capital cost and capital structure – Brusov–Filatova–Orekhova theory (BFO theory) (Brusov et al. 2011, 2013; Filatova et al., 2008) and within its perpetuity limit – Modigliani – Miller theory is investigated. By direct incorporation of inflation into both theories, it is shown for the first time that inflation not only increases the equity cost and the weighted average cost of capital, but as well it changes their dependence on leverage. In particular, it increases growing rate of equity cost with leverage. Capitalization of the company is decreased under accounting of inflation.

Author Biographies

Peter N. Brusov, Financial University

Department of Applied Mathematics

Tatiana Filatova, Financial University

Municipal Management Faculty

Natali Orehova, Department of Financial and Economical Technology

Institute of Business, Management and Low

Downloads

Published

2014-06-18

How to Cite

Brusov, P. N., Filatova, T., & Orehova, N. (2014). Inflation in Brusov–Filatova–Orekhova Theory and in its Perpetuity Limit – Modigliani – Miller Theory. Journal of Reviews on Global Economics, 3, 175–185. Retrieved from https://www.lifescienceglobal.com/pms/index.php/jrge/article/view/1932

Issue

Vol. 3 (2014)

Section

Articles

License

Policy for Journals/Articles with Open Access

Authors who publish with this journal agree to the following terms:

  • Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.

  • Authors are permitted and encouraged to post links to their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work

Policy for Journals / Manuscript with Paid Access

Authors who publish with this journal agree to the following terms:

  • Publisher retain copyright .

  • Authors are permitted and encouraged to post links to their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work .