Business, Management and Accounting
4 years ago

New valuation method could revolutionize financial decision-making for businesses.

European Financial Management
A Reconsideration of Tax Shield Valuation
Enrique R. Arzac, Lawrence R. Glosten

Paper Summary

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The article rethinks how to value tax shields in a company with a constant debt-to-equity ratio. It clarifies how to discount cash flows and calculate the weighted average cost of capital correctly. The researchers provide new formulas for valuing tax shields and explain how to apply them to different financial situations.