Reply to "Comment on the value of tax shields is NOT equal to the present value of tax shields"

Pablo Fernandez

No D/579, IESE Research Papers from IESE Business School

Abstract: The Comment is thought provoking and helps a lot in rethinking the value of tax shields. However, the conclusion of Fieten, Kruschwitz, Laitenberger, Löffler, Tham, Vélez-Pareja and Wonder (2005) is not correct because, as will be proven below, the main result of Fernández (2004) is correct for several situations. Equation (16a) shows that the value of tax shields depends only upon the nature of the stochastic process of the net increase of debt.

Keywords: Value of tax shields; present value of the net increases of debt (search for similar items in EconPapers)
JEL-codes: G12 G31 G32 (search for similar items in EconPapers)
Pages: 8 pages
Date: 2005-01-15
New Economics Papers: this item is included in nep-acc and nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Journal Article: Reply to "Comment on the value of tax shields is NOT equal to the present value of tax shields" (2005)
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