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Disequilibrium Structures and Financing Decisions in the Firm
Author(s) -
VICKERS DOUGLAS
Publication year - 1974
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.1974.tb00869.x
Subject(s) - disequilibrium , capital budgeting , economics , constraint (computer aided design) , investment (military) , capital (architecture) , interdependence , cost of capital , capital investment , microeconomics , marginal cost , finance , incentive , medicine , mechanical engineering , history , archaeology , project appraisal , politics , political science , law , engineering , ophthalmology
The business firm confronts interdependent decision problems in production, investment, and finance. Emphasis is here placed on the firm's decision criteria in disequilibrium situations or at infra‐optimum structural planning and decision points. The operative cost of capital is shown to be ‘the full marginal cost of relaxing the money capital availability constraint’. The popular ‘weighted average cost of capital’ is shown to be an ‘equilibrium datum’ which has operative significance only at optimum structural positions. It does not offer adequate guidance to financing and investment decisions in disequilibrium situations.