Simple formulas for the price of corporate discount and coupon bonds are found using the Longstaff and Schwartz valuation approach for the debt claims of a firm, where default is triggered by a special State variable: the firm's asset-to-debt-ratio. Instead of keeping the total amount of debt...

This note revisits the valuation of the tax shield of corporate borrowing when borrowing is not linked to enterprise value. In this case past literature has typically discounted the tax shield at the cost of borrowed capital gross of corporate tax, not net of corporate tax. Yet the latter often...