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A NOTE ON THE MARGINAL COST OF DEBT CAPITAL
Author(s) -
Vickers Douglas
Publication year - 1983
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.1468-5957.1983.tb00460.x
Subject(s) - weighted average cost of capital , cost of capital , economics , debt , monetary economics , marginal cost , capital (architecture) , capital structure , constraint (computer aided design) , finance , financial capital , microeconomics , capital formation , profit (economics) , archaeology , history , mechanical engineering , engineering
The firms marginal cost of debt capital was interpreted in this author's previous publications as the “full marginal cost of relaxing the money capital availability constraint'’ when the incremental money capital employed takes the form of debt capital. Account is thereby taken of the effects on financing costs of the increased risk exposure that debt financing implies for both debt and equity holders. The present paper clarifies a misconception in a recently published paper by Draper and Findlay, and exhibits the linkage between concepts relevant to the firm's fmancing decision and the general marginal analysis.