A “Silver Age” of the Companies. Conditions of Existence of “Golden Age” and “Silver Age” Effects

In this chapter, we continue to study the effect of the “golden age” of the company, which we described in Chap. 14. As it was shown for the first time (Brusov et al., Modern corporate finance, investments and taxation. Springer International Publishing, Switzerland, 373 p. monograph. SCOPUS, 2015), the valuation of the weighted average cost of capital, WACC, in the Modigliani–Miller theory (Modigliani et al. 1958, 1963, 1966) is not minimal and valuation of the company capitalization is not maximal, as all financiers assumed up to this discovery: at some age of the company, its WACC value turns out to be lower than in the Modigliani–Miller theory, and company capitalization V turns out to be greater than V in the Modigliani–Miller theory. It was shown that, from the point of view of cost of attracting capital there are two types of dependences of weighted average cost of capital, WACC, on the company age n: monotonic decrease with n and decrease with passage through minimum, followed by a limited growth. In practice, there are companies with both types of dependences of WACC on the company age n.