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The top curve shows the tax shield gains of debt financing, while the bottom curve includes that minus the costs of bankruptcy. The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes ...
Roll's critique. Roll's critique is a famous analysis of the validity of empirical tests of the capital asset pricing model (CAPM) by Richard Roll. It concerns methods to formally test the statement of the CAPM, the equation. This equation relates an asset's expected return to the asset's sensitivity to the market portfolio return .
The Cambridge capital controversy, sometimes called " the capital controversy " [ 1 ] or " the two Cambridges debate ", [ 2 ] was a dispute between proponents of two differing theoretical and mathematical positions in economics that started in the 1950s and lasted well into the 1960s. The debate concerned the nature and role of capital goods ...
A critique of the results of capitalism was formulated by Karl Marx. According to Marx, the treatment of labor as a commodity led to people valuing things more in terms of their price rather than their usefulness (see commodity fetishism ), and hence to an expansion of the system of commodities .
Capital asset pricing model. An estimation of the CAPM and the security market line (purple) for the Dow Jones Industrial Average over 3 years for monthly data. In finance, the capital asset pricing model (CAPM) is a model used to determine a theoretically appropriate required rate of return of an asset, to make decisions about adding assets to ...
Dividend discount model. In financial economics, the dividend discount model (DDM) is a method of valuing the price of a company's capital stock or business value based on the assertion that intrinsic value is determined by the sum of future cash flows from dividend payments to shareholders, discounted back to their present value. [1][2] The ...
Marxian economics. Marxism and Keynesianism is a method of understanding and comparing the works of influential economists John Maynard Keynes and Karl Marx. Both men's works has fostered respective schools of economic thought (Marxian economics and Keynesian economics) that have had significant influence in various academic circles as well as ...
The First Chicago method takes account of payouts to the holder of specific investments in a company through the holding period under various scenarios; see Corporate finance § Quantifying uncertainty. Most often this methodology will involve the construction of: Once these have been constructed, the valuation proceeds as follows. [4] First ...