The value of tax shields with a fixed book-value leverage ratio

Preprint OPEN
Fernandez, Pablo;
(2005)
  • Subject: Value of tax shields; present value of the net increases of debt; required return to equity;
    • jel: jel:G12 | jel:G32 | jel:G31

The value of tax shields depends only on the nature of the stochastic process of the net increases of debt. The value of tax shields in a world with no leverage cost is the tax rate times the current debt plus the present value of the net increases of debt. We develop v... View more
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