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

7 Pages Posted: 25 Nov 2003

See all articles by Nicholas X. Wonder

Nicholas X. Wonder

Western Washington University - College of Business & Economics

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation

Joseph Tham

Educational Independent Consultant

Andreas Loeffler

Freie Universität Berlin

Paul Fieten

Ernst & Young, The Netherlands

Date Written: November 21, 2003

Abstract

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.

Keywords: Present value of tax shield, perpetuities

JEL Classification: G31, G32, H43

Suggested Citation

Wonder, Nicholas X. and Velez-Pareja, Ignacio and Tham, Joseph and Loeffler, Andreas and Fieten, Paul, Revised Comment on 'the Value of Tax Shields is Not Equal to the Present Value of Tax Shields' (November 21, 2003). Available at SSRN: https://ssrn.com/abstract=471062 or http://dx.doi.org/10.2139/ssrn.471062

Nicholas X. Wonder (Contact Author)

Western Washington University - College of Business & Economics ( email )

Department of Finance and Marketing
Bellingham, WA 98225-9071

Ignacio Velez-Pareja

Grupo Consultor CAV Capital Advisory & Valuation ( email )

Ave Miramar # 18-93 Apt 6A
Cartagena
Colombia
+573112333074 (Phone)

HOME PAGE: http://cashflow88.com/decisiones/decisiones.html

Joseph Tham

Educational Independent Consultant ( email )

Andreas Loeffler

Freie Universität Berlin ( email )

Thielallee 73
Berlin, 14195
Germany

HOME PAGE: http://www.andreasloeffler.de

Paul Fieten

Ernst & Young, The Netherlands ( email )

Postbus 488
Rotterdam, 3000 AL
Netherlands

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