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Influence of debt financing on the effectiveness of the finite duration investment project

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Listed:
  • Peter Brusov
  • Tatiana Filatova
  • Mukhadin Eskindarov
  • Pavel Brusov
  • Natali Orehova
  • Anastasia Brusova

Abstract

The problem of the influence of debt financing on the effectiveness of the arbitrary duration investment project is studied and quantitative results are obtained for the first time. The effectiveness of the investment project is considered from two perspectives: the owners of equity and debt and equity holders only. It was shown, that NPV practically always decreases with leverage in case of a constant value of equity, and the maximum leverage level, at which the project is still effective ( NPV > 0), was found. In case of a constant value of the total invested capital it is possible an increase of NPV with leverage as well as its decrease, depending on the relation between the parameters of the project.

Suggested Citation

  • Peter Brusov & Tatiana Filatova & Mukhadin Eskindarov & Pavel Brusov & Natali Orehova & Anastasia Brusova, 2012. "Influence of debt financing on the effectiveness of the finite duration investment project," Applied Financial Economics, Taylor & Francis Journals, vol. 22(13), pages 1043-1052, July.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:13:p:1043-1052
    DOI: 10.1080/09603107.2011.637893
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    References listed on IDEAS

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    Cited by:

    1. Islam, Silvia Z. & Khandaker, Sarod, 2015. "Firm leverage decisions: Does industry matter?," The North American Journal of Economics and Finance, Elsevier, vol. 31(C), pages 94-107.
    2. R. Ibragimov G. & G. Panferov A. & Р. Ибрагимов Г. & Г. Панферов А., 2014. "Обобщение Теории Модильяни-Миллера: Миф И Реальность // Generalization Of The Modigliani-Miller Theory: Myth And Reality," Финансы: теория и практика/Finance: Theory and Practice // Finance: Theory and Practice, ФГОБУВО Финансовый университет при Правительстве Российской Федерации // Financial University under The Government of Russian Federation, issue 3, pages 114-122.

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