English, Article, Journal or magazine article edition: The value of tax shields is not equal to the present value of tax shields: A correction Fernandez, Pablo

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Bookmark: http://trove.nla.gov.au/version/170513
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The value of tax shields is not equal to the present value of tax shields: A correction
Author
  • Fernandez, Pablo
Physical Description
  • preprint
Notes
  • I correct some expressions in Fernández (2004) and provide a more general expression for the value of tax shields. This expression is the difference between the present values of two different cash flows, each with its own risk: the present value of taxes for the unlevered company and the present value of taxes for the levered company. The value of tax shields in a world with no leverage cost is the tax rate times the current debt, plus the tax rate times the present value of the net increases of debt. The value of tax shields depends only on the nature of the stochastic process of the net increase of debt; it does not depend on the nature of the stochastic process of the free cash flow.
  • Value of tax shields; present value of the net increases of debt; required return to equity;
  • RePEc:ebg:iesewp:d-0581
Language
  • English
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