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By taxing capital income and transferring it to the borrowing-constrained individuals, the capital market imperfection—the liquidity constraints—is alleviated at the cost of distorting saving. Equivalently, taxing saving may reduce the implicit subsidy on saving created by the borrowing constraints and thus restore efficiency in saving.
In economics, an implicit cost, also called an imputed cost, implied cost, or notional cost, is the opportunity cost equal to what a firm must give up in order to use a factor of production for which it already owns and thus does not pay rent. It is the opposite of an explicit cost, which is borne directly. [1]
The user cost approach identifies costs unrecoverable by the owner. These can be defined as: = (+ + +) Where i is the interest rate, r p is the property tax rate, m is the cost of maintenance, and d is depreciation. The rent is the sum of these rates multiplied by the price of the house, [2] P H. More detailed user cost models consider ...
It is different from accounting profit, which only relates to the explicit costs that appear on a firm's financial statements. An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore ...
In economics and accounting, the cost of capital is the cost of a company's funds (both debt and equity), or from an investor's point of view is "the required rate of return on a portfolio company's existing securities". [1] It is used to evaluate new projects of a company.
In economics, the theory of imputation, first expounded by Carl Menger, maintains that factor prices are determined by output prices [6] (i.e. the value of factors of production is the individual contribution of each in the final product, but its value is the value of the last contributed to the final product (the marginal utility before reaching the point Pareto optimal).
The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger [ 1 ] who considered a balance between the dead-weight costs of bankruptcy and the tax saving ...
The capital charge is the cash flow required to compensate investors for the riskiness of the business given the amount of economic capital invested. The cost of capital is the minimum rate of return on capital required to compensate investors (debt and equity) for bearing risk, their opportunity cost.