Optimal capital structure. A multi-period programming model for use in financial planning

Ivan E. Brick, W. G. Mellon, Julius Surkis, Murray Mohl

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

This paper describes a multi-period, chance constrained mathematical programming model to compute for each period, the firm's optimal debt to equity ratio and the optimal maturity distribution of its debt. The model assumes that the firm's objective is to maximize total value of the firm, and that the firm operates in a world of uncertainty, with corporate income taxes and bankruptcy costs. Finally, the actual coupon rate paid by the firm which is commensurate to the risk of default is endogenously determined by the model.

Original languageEnglish (US)
Pages (from-to)45-67
Number of pages23
JournalJournal of Banking and Finance
Volume7
Issue number1
DOIs
StatePublished - Mar 1983

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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