Costo de Capital con Costo del Patrimonio Apalancado Como el Riesgo delos Escudos Fiscales (Cost of Capital with Levered Cost of Equity as the Risk of Tax Shields)

Abstract:     
We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing perpetuities. In addition, it can be calculated without the circularity between value and discount rate.

The English version of this paper can be found at http://ssrn.com/abstract=1655244.

Note: Downloadable document is in Spanish.

Number of Pages in PDF File: 15

Keywords: Cost of levered equity, firm valuation, tax shields, discount rate for tax shields, risk of tax shields

JEL Classification: M21, M40, M46, M41, G12, G31, J33

working papers series