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Wealth Maximization and the Cost of Capital

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  • Alan J. Auerbach

Abstract

I. Introduction, 433.—II. The model, 434.—III. The problem, 435.—IV. Wealth maximization: no personal taxes, 436.—V. Wealth maximization with personal taxes, 438.—VI. Firm value and the cost of capital, 440.—VII. Financial policy and the cost of capital, 442.—VIII. Conclusion, 445.

Suggested Citation

  • Alan J. Auerbach, 1979. "Wealth Maximization and the Cost of Capital," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 433-446.
    • Handle: RePEc:oup:qjecon:v:93:y:1979:i:3:p:433-446.
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    References listed on IDEAS

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    1. Bradford, David F., 1981. "The incidence and allocation effects of a tax on corporate distributions," Journal of Public Economics, Elsevier, vol. 15(1), pages 1-22, February.
    2. Martin Feldstein & Jerry Green & Eytan Sheshinski, 1979. "Corporate Financial Policy and Taxation in a Growing Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(3), pages 411-432.
    3. Gordon Pye, 1972. "Preferential Tax Treatment of Capital Gains, Optimal Dividend Policy, and Capital Budgeting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 86(2), pages 226-242.
    4. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
    5. Auerbach, Alan J., 1979. "Share valuation and corporate equity policy," Journal of Public Economics, Elsevier, vol. 11(3), pages 291-305, June.
    6. Stapleton, R C, 1972. "Taxes, the Cost of Capital and the Theory of Investment," Economic Journal, Royal Economic Society, vol. 82(328), pages 1273-1292, December.
    7. Mervyn A. King, 1974. "Taxation and the Cost of Capital," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(1), pages 21-35.
    8. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-275, May.
    9. Stiglitz, Joseph E., 1973. "Taxation, corporate financial policy, and the cost of capital," Journal of Public Economics, Elsevier, vol. 2(1), pages 1-34, February.
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