We generalize the classical concept of a certainty equivalent to a model where an investor can trade on a capital market with several future trading dates. We show that if a riskless asset is traded and the investor has a CARA utility then our generalized certainty equivalent can be evaluated...

In this paper we consider firms having pension and other non-tradeable liabilities and we ask whether the methods of discounted cash flow (DCF) can be used for evaluation of the company. This question was so far not discussed in the literature systematically. We show how balance sheet are to be...

For the valuation of a company it is necessary to take the in come tax of its owners into account. When looking at a squeeze-out with investors who have different wealth this implies that fair compensation payments will be different. This is in contradiction to the German Stock Companies Act. In...

In a forthcoming paper, Fernandez (2002) claims to derive a formula for the valuation of debt tax shields for firms with cash flows that grow perpetually at a constant rate. We show that his formula is incorrect and provide an example where his valuation would admit arbitrage.

In der Theorie der Unternehmensbewertung gibt es ein Problem, das die Literatur unter dem Etikett der Anschlussverzinsung diskutiert. Damit habe ich mich am 13. Februar 2009 in meiner Abschiedsvorlesung auseinandergesetzt. Das hier vorliegende Essay stellt eine überarbeitete Fassung dieser...

We extend the WACC approach to a tax system having a firm income tax and a personal income tax of the investor as well. We use an artificial tax system incorporating most of the G-7 national tax codes as for example the classical or the imputation systems. On our website (www.wacc.de) WACC...

Valuation of firms is generally based on the WACC approach which typically neglects personal income taxes. This paper extends this approach to incorporate personal income taxes and develop a generalized valuation formula which can be used for any taxation system. The approach is illustrated for...

In this paper we evaluate an indivisible investment project that is carried out in a corporation under very simple premises. In particular, we discuss a one-period model with certainty, the pure domestic case and proportional tax rates. Surprisingly, the decision problem turns out to be rather...

The traditional literature on the CAPM assumes that investor's tax payments simply vanish from the model. This assumption is not at all consistent with the actual behavior of the Treasury. The theory of general equilibrium states that an interest rate rf = 0 will not affect prices if taxes are...