 Valuation of Interest Tax ShieldsMichael Dothan ()
Chapter 71 in Encyclopedia of Finance, 2022, pp 1641-1656 from Springer Abstract: Abstract Assessing financing effects, such as tax benefits of debt, is an important part of financial analysis and valuation. This chapter describes the frameworks and valuation formulas of Modigliani-Miller, Miles-Ezzell, modified Miles-Ezzell, Modigliani-Miller with growth, Fernandez, and other related setups. In addition, the chapter examines recent dynamic models that value interest tax shields in the context of flexible financing strategies. The chapter starts with two summary tables that list notation, definitions, and formulas for some discrete-time valuation models. Because of the diversity of views on the appropriate discount rate for interest tax shields, I present a short derivation of the Miles-Ezzell formula. The last part of the chapter reviews recent dynamic valuation models of interest tax shields, including the application of barrier options to analyzing the effects of flexible financing strategies, and presents a summary that compares the valuation outcomes of the various models. Keywords: Barrier options; Default; Financing strategies; Leverage; Tax shields; Valuation (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-91231-4_71 Ordering information: This item can be ordered from DOI: 10.1007/978-3-030-91231-4_71 Access Statistics for this chapter More chapters in Springer Books from Springer |
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