English, Article, Journal or magazine article edition: Valuing companies with a fixed book-value leverage ratio Fernandez, Pablo

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Bookmark: http://trove.nla.gov.au/version/171129
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Valuing companies with a fixed book-value leverage ratio
Author
  • Fernandez, Pablo
Physical Description
  • preprint
Notes
  • We develop valuation formulae for a company that maintains a fixed book-value leverage ratio and claim that it is more realistic than to assume, as Miles-Ezzell (1980) do, a fixed market-value leverage ratio. The value of tax shields depends only on the present value 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 also show that the appropriate discount rates for the equity cash flows and for the expected value of the equity are different.
  • Company valuation; value of tax shields; present value of the net increases of debt; required return to equity;
  • RePEc:ebg:iesewp:d-0614
Language
  • English
Contributed by
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