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Equilibrium in the Pricing of Capital Assets, Risk-Bearing Debt Instruments, and the Question of Optimal Capital structure: A Comment
Published online by Cambridge University Press: 19 October 2009
Extract
In a recent article in this Journal, Haugen and Pappas (H-P, hereafter) [1] attempted to prove, within the framework of the capital asset pricing model, the already proven proposition that the cost of capital is invariant with respect to leverage even with risky debt. The H-P proof contains a serious error which we would like to point out in this note.
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- Journal of Financial and Quantitative Analysis , Volume 7 , Issue 4 , September 1972 , pp. 2001 - 2003
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- Copyright © School of Business Administration, University of Washington 1972
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