Modern Theory of Capital Cost and Capital Structure: Brusov–Filatova–Orekhova Theory (BFO Theory)

One of the serious limitations of the Modigliani–Miller theory is the suggestion about perpetuity of the companies. In 2008, Brusov–Filatova–Orekhova (Filatova et al. Bull FU 48:68–77, 2008) have lifted up this limitation and shown, that the accounting of the finite lifetime (finite age) of the company leads to significant changes in all Modigliani–Miller results (Мodigliani and Мiller, Am Econ Rev 48:261–297, 1958; Am Econ Rev 53:147–175, 1963; Am Econ Rev 56:333–391, 1966): capitalization of the company is changed, as well as the equity cost, ke, and the weighted average cost of capital, WACC, in the presence of corporative taxes. Besides a number of qualitatively new effects in corporate finance, obtained in Brusov–Filatova–Orekhova theory (Brusov et al. Appl Financ Econ 21:815–824, 2011a; Res J Econ Bus ICT 2:16–21, 2011b; Res J Econ Bus ICT (UK) 2:11–15, 2011c; Res J Econ Bus ICT 2: 16–21, 2011d; Appl Financ Econ 22:1043–1052, 2012a; J Rev Glob Econ 1:106–111, 2012b; J Rev Glob Econ 2:94–116, 2013a; J Rev Glob Econ 2:183–193, 2013b; Cogent Econ Financ 2:1–13, 2014a; J Rev Glob Econ 3:175–185, 2014b; Brusov and Filatova, Financ Credit 435:2–8, 2011), is absent in Modigliani–Miller theory.