In this note, the present value of the tax shield is reconsidered. In most corporate finance textbooks, it is commonly assumed that the discount rate for the tax shield is d, the risk-free rate for debt. Here, it is shown that the correct discount rate for the tax shield is rho, the required...

Most popular corporate finance textbooks (See Benninga and Sarig, 1997, 2007 Brealey, Myers and Marcus, 1996, Brealey, Myers and Allen, 2006, Brealey and Myers, 2000, 2003 and previous editions, Copeland, Koller and Murrin, 1995 and 2000, Damodaran, 1996, Gallagher and Andrew, 2000, Van Horne,...

The Vietnamese version is available at: http://ssrn.com/abstract=493985In project finance, the viability of the project is based on the expected cash flows generated by the project rather than on the strength of the company's balance sheet. Thus, it is relevant to construct the annual cash flow...

Everybody uses tax shields when calculating the Weighted Average Cost of Capital (WACC). The textbook formula includes the tax shield with the (1-T) factor affecting the contribution of debt to the WACC. Tax shields are a strange mix of accounting and accrual related to WACC that relies on...

We examine the proper valuation of perpetuities without real growth. The case of a pure non growing perpetuity (zero real growth and zero inflation) is of academic interest but in practice it might be difficult to find. The findings contradict what is generally accepted in the literature. In...

Der Kapitalwert lässt sich auch bei Null- und Negativzinsen zumindest über endliche Zeiträume einfach berechnen sowie betriebswirtschaftlich für Investitionsentscheidungen sinnvoll ver­wen­den. Volkswirtschaftlich ist relevant, warum es Zinsen von und unter null überhaupt gibt und ob...

When estimating future or pro forma financial statements and free cash flows we need to estimate future prices. In doing this we must estimate nominal increases in prices of many items, for instance selling prices, inputs prices (raw material, labor, overhead, etc.), cost of future debt, and...

In this teaching note, we present a clear and detailed exposition of Harberger's approach to economic appraisal. The Harberger framework consists of three basic postulates. The first postulate states that the demand curve measures the benefits of a project. The second postulate states that the...