For several years, when setting discount rates Damodaran has advocated more consideration of country risk premiums (CRP) when it comes to assessing companies with activities in emerging markets. In this paper we want to perform a systematic analysis and critical discussion of his CRP concept. It...

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

An investor using the payback method needs a criterion which will separate the good projects from the bad. This criterion should be compatible with the net present value concept. We call it the critical payback period and prove that such a period exists

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...

We show that a transversality condition is necessary when it comes to valuing a company with an infinite lifespan. Without transversality the firm value cannot be uniquely determined. Also, an assumption on a lower bound of cash flows is necessary to achieve the desired result. We discuss four...