A “Golden Age” of the Companies: Conditions of Its Existence

In this Chapter we continue to study this problem and investigate which companies have the “golden age,” i.e., obey the latter type of dependence of WACC on n (Brusov 2018b). With this aim, we study the dependence of WACC on the age of company n at various leverage levels within a wide spectrum of capital costs values as well as the dependence of WACC on leverage level L at fixed company age n. All calculations have been done within modern theory of capital cost and capital structure BFO by Brusov–Filatova–Orekhova (Brusov et al., Appl Financ Econ 21(11):815–824, 2011a, Res J Econ Bus ICT 2:16–21, 2011b, Res J Econ Bus ICT (UK) 2:11–15, 2011c, Finance Credit 435:2–8, 2011d, Brusov et al., Appl Financ Econ 22(13):1043–1052, 2012a, J Rev Glob Econ 1:106–111, 2012b; Brusov et al., J Rev Glob Econ 2:94–116, 2013a, J Rev Glob Econ 2:183–193, 2013b, Brusov et al., Cogent Econ Finance 2:1–13, 2014a, J Rev Glob Econ 3:175–185, 2014b; Filatova et al., Bull FU 48:68–77, 2008). We have shown that the existence of the “golden age” of company does not depend on the value of capital costs of the company, but depends on the difference between equity k0 and debt kd costs. The “golden age” of company exists at small enough difference between k0 and kd costs, while at high value of this difference the “golden age” of company is absent: curve WACC(n) monotonic descends with n. For the companies with the “golden age” curve WACC(L) for perpetuity companies lies between curves WACC(L) for company ages n = 1 and n = 3, while for the companies without the “golden age” curve WACC(L) for perpetuity companies is the lowest one.