2004 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was 42,880 million euros, however, not as good as 2003 when their value creation reached a bit over 160,000 euros. The companies that created more value for their...

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...

The Comment is thought provoking and helps a lot in rethinking the value of tax shields. However, the conclusion of Fieten, Kruschwitz, Laitenberger, Loffler, Tham, Velez-Pareja and Wonder (2005) is not correct because, as will be proven below, the main result of Fernandez (2004) is correct for...

Although Arzac and Glosten (2005) affirm that the value of tax shields depends upon the nature of the equity stochastic process, which, in turn depends upon the free cash flow process, I prove that the value of tax shields depends only upon the nature of the stochastic process of the net...

In a recent paper, Cooper and Nyborg (2004) argue that the results of Fernandez (2004) are wrong because value-additivity is violated and because quot;Fernandez paper comes from mixing the Miles-Ezzell leverage policy with the Miller-Modigliani leverage adjustment.quot;Cooper and Nyborg paper is...

The market risk premium is one of the most important but elusive parameters in finance. It is also called equity premium, market premium and risk premium. The term market risk premium is difficult to understand because it is used to designate three different concepts:1. Required market risk...

This paper contains a collection and classification of 80 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations referred to in this paper in his capacity as a consultant in company...

2003 was a good year for the shareholders of the companies in the Euro Stoxx 50: the shareholder value creation of these 50 companies was 150,016 million euros (E). The companies that created more value for their shareholder were Siemens (E18,778 million), Telefonica (15,382) and BSCH (12,443)....

The value of tax shields depends upon the nature of the stochastic process of the net increase of debt, and does not depend upon the nature of the stochastic process of the free cash flow. The value of tax shields in a world with no leverage cost is the tax rate times the debt plus the tax rate...

This paper contains a collection and a classification of 75 errors seen in company valuations performed by financial analysts, investment banks and financial consultants. The author had access to most of the valuations that are referred to in this paper when consulting in purchases, sales and...