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Hot answers tagged capital-structure

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To elaborate on what has been said in the comments already, using GMM based on Euler Equations generally involves uncertainty that motivates some sort of expected orthogonality between a moment equation and some instruments. Here is a common example of a "Consumption-Based Asset-Pricing Model" (see, for example, Campbell, 1993, 1996) posted by Dave Giles: A ...

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The Flow of Funds (Financial Accounts of the United States) should have what you need. For example, table B.1 Net National Wealth Table Description Table (Billions of dollars; amounts outstanding end of period, not seasonally adjusted) might be very close to what you want.

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In Economics "Land" as a form of capital is those parts of the natural environment that had become a subject of economic transactions (market or otherwise). Consider a piece of land that is public property, say, a mountain. No economic activity is taking place related to that mountain. Then, it is not consider part of the Fixed Capital base of the national ...

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A firm's Output $Y$ (in value-added terms, i.e. over and above the value of purchases of third-party services and materials) is distributed as reward to the factors of production. Denote $K$ the book value of the company's assets. Use the standard notation $L$ for payments to the labor/human capital input to production. Denote $r$ the capital rate of ...

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The point @EnergyNumbers raises is correct, and it's easy to understand from an intuitive standpoint: One of the key roles of financial intermediaries is to match the demand for liabilities of a given tenor to the demand for assets of a given tenor. Financial intermediation allows maturity mismatches to exist in non-finance sectors of the economy by taking ...

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Leveraging is done with debt. Most high net worth individuals are debt free and even if they take out loans, it is to reduce taxes. However, high net worth individuals normally have their wealth in a form of equities or stocks. For example Bill Gates' wealth is mostly in Microsoft stock, Warren Buffet's is in Berkshire Hathaway's, etc. The corporations that ...

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@chsk gives the correct answer if the firm has to raise funds using the equity market and the cost of those funds is the same as that for the firm. However, I would recommend that this firm do the project. As indicated in the project, the risk free rate of return is 10%, and this project "...will earn a 13% rate of return for certain into the indefinite ...

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Assuming that the project has the same beta as the firm's existing assets -- and assuming I'm remembering what I learned in my introductory CorpFin class correctly --, you are indeed right. The present value of future cash flows is, in general, $$\mathrm{PV} = \sum_{t=1}^T \frac{ \mathbb{E}[ \tilde{c}_t ] }{ (1 + \mu_t)^t }$$ where \mu_t = r_f + (\mu_M -...

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Basel II opened the possibility towards "your individual interest rate" by allowing (and encouraging) banks to use more advanced methods of estimating Credit Risk, individualizing even, customer-per-customer, for example using Advanced-Internal ratings-based approach. This means that the banks can lower interest rates towards clients that score better ...

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Nothing about marginal productivity theory depends on the exact truth of a simple aggregate production function with capital defined by a single number Different sorts of capital used as separate production technologies prevent clean aggregation to a representative form of capital but does not prevent capital from being paid its marginal product. To make ...

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I don't think the term is very well defined. I think it depends on the context. I have maybe two possibilities. I'll try to provide references with each. Possible Definition 1 The first coincides with @Alecos' answer. The following is taken from the beginning of "The Over-Capitalization Effect with Diversification and Cross Subsidization," by Rozek,...

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