We value a company that targets its capital structure in book-value terms. This capital structure definition provides us with a Value of Tax Shields that lies between those of Modigliani-Miller (fixed debt) and Miles-Ezzell (fixed market-value leverage ratio). If a company targets its leverage...

Spanish Abstract: Es muy importante entender qué es la contabilidad porque es la manera en que las empresas nos comunican su situación. Pero en 35 años de docencia y práctica profesional he detectado varios problemas en la interpretación de la contabilidad por distintos usuarios de la...

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. By applying this formula to specific...

The value of tax shields depends only on the nature of the stochastic process of the net increase of debt. 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. By applying this...

I correct some expressions of Fernandez (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...