English, Article, Journal or magazine article edition: The value of tax shields with a fixed book-value leverage ratio Fernandez, Pablo

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Bookmark: http://trove.nla.gov.au/version/170410
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The value of tax shields with a fixed book-value leverage ratio
Author
  • Fernandez, Pablo
Physical Description
  • preprint
Notes
  • The value of tax shields depends only on the nature of the stochastic process of the net increases of debt. The value of tax shields in a world with no leverage cost is the tax rate times the current debt plus the present value of the net increases of debt. We develop valuation formulae for a company that maintains a fixed book-value leverage ratio and show that it is more realistic than to assume, as Miles-Ezzell (1980) do, a fixed market-value leverage ratio. We also show that Miles-Ezzell assume that the increase of debt is proportional to the increase of the free cash flows.
  • Value of tax shields; present value of the net increases of debt; required return to equity;
  • RePEc:ebg:iesewp:d-0612
Language
  • English
Contributed by
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