Optimal Capital Structure Choice Revisited: A Review

Abstract:     
This paper studies an optimal capital structure choice under uncertainties. First, I derive the expected return on equity. Thereby, I obtain many important results and economic implications such as the weighted average of cost of capital and the optimal capital structure from new perspective. I elucidate properties of the optimal capital structure graphically. Thereby, I can safely say that the model presented in this paper provide a solution to capital structure puzzle. All of those are very important for further development of various economic areas, such as corporate finance, asset pricing theory, and tax theory and so forth.

Number of Pages in PDF File: 17

Keywords: Return on equity, MM no-tax result, weighted average of cost of capital

JEL Classification: C61, D91, G13, G32

working papers series