Comment on 'The Value of Tax Shields is NOT Equal to the Present Value of Tax Shields'

2003 ◽  
Author(s):  
Nicholas X. Wonder ◽  
Joseph Tham ◽  
Ignacio Velez-Pareja
Keyword(s):  
Present Value ◽  
Tax Shields

Comment on 'The Value of Tax Shields is NOT Equal to the Present Value of Tax Shields', Including an Arbitrage Opportunity

2003 ◽  
Author(s):  
Nicholas X. Wonder ◽  
Paul Fieten ◽  
Lutz Kruschwitz ◽  
Jörg Laitenberger ◽  
Andreas Löffler ◽  
...  
Keyword(s):  
Present Value ◽  
Tax Shields ◽  
Arbitrage Opportunity

Revised Comment on 'The Value of Tax Shields is NOT Equal to the Present Value of Tax Shields'

2003 ◽  
Author(s):  
Nicholas X. Wonder ◽  
Joseph Tham ◽  
Ignacio Velez-Pareja ◽  
Andreas Löffler ◽  
Paul Fieten
Keyword(s):  
Present Value ◽  
Tax Shields

scholarly journals The implied cost of capital of government’s claim and the present value of tax shields: A numerical example

2014 ◽  
Vol 3 (1) ◽  
pp. 40
Author(s):  
M. B.J. Schauten ◽  
B. Tans
Keyword(s):  
Discount Rate ◽  
Cost Of Capital ◽  
Present Value ◽  
Numerical Example ◽  
Implied Cost Of Capital ◽  
Tax Shields ◽  
The Difference ◽  
The Cost

This paper provides a numerical example of how to calculate the cost of capital of government’s claim (rg) and the present value of tax shields. Schauten and Tans (2006) show for the models used in Myers (1974), Miles and Ezzell (1980) and Harris and Pringle (1985), that the present value of tax shields is equal to the difference between the present value of the expected taxes paid by the unlevered firm and the levered firm, with each of the models’ implied rg as discount rate. We discuss a numerical example using the valuation framework by Schauten and Tans (2006) and give a logic explanation for the low implied rgs of Miles and Ezzell’s and Harris and Pringle’s model.

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