A firm's cost of capital used in discounted cash flow analysis is commonly calculated as a weighted average of the after tax costs of the firm's various sources of financing (equity, debt, preferred stock). Its use implies that for investment projects earning precisely the WACC the cash (in)flow...

In this journal [Miller, R. A. (2009). The weighted average cost of capital is not quite right. The Quarterly Review of Economics and Finance, 49, 128-138], I argued that the standard WACC formula is inadequate in most circumstances to reward stockholders and bondholders where the necessary cash...

“[U]nder competition, the rate of return on investment tends toward equality in all industries.” Introductory and intermediate microeconomics textbooks are sketchy in explaining how capital is allocated by financial markets. Capital budgeting techniques, primarily net present value, deserve...

We consider a multinational firm that seeks to maximize its total amount of interest tax shield while following a constant debt ratio policy on a global level. The firm's total interest tax shield can then be considered as a piecewise-linear increasing function that is concave with respect to...

For short forecast horizons, we find statistical evidence that the oil price volatility observed ex post explains ex-ante disagreement between oil price forecasters of the ECB’s professional survey. Since the forecasts considered are quarterly average prices, the observed disagreement is...

This paper examines the impact that uncertainty over economic growth may have on global energy transition and CO2 prices. We use a general-equilibrium model derived from MERGE, and define several stochastic scenarios for economic growth. Each scenario is characterized by the likelihood of a...