Debt Policy, Corporate Taxes, and Discount Rates
Mark Grinblatt and
Jun Liu
University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA
Abstract:
This paper studies the valuation of assets with debt tax shields when debt policy is a general time-dependent function of the asset’s unlevered cash flows, value, and history. In a continuous-time setting, it shows that the value of a project’s debt tax shield satisfies a partial di�erential equation, which simplifies to an easily solved ordinary di�erential equation for most plausible debt policies. A large class of cases exhibits closed-form solutions for the value of a levered asset, the value of its tax shield, and the appropriate cost of capital for discounting unlevered cash flows so as to account for the value of the tax shield.
Date: 2002-11-06
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.escholarship.org/uc/item/7dx622kj.pdf;origin=repeccitec (application/pdf)
Related works:
Journal Article: Debt policy, corporate taxes, and discount rates (2008)
Working Paper: Debt Policy, Corporate Taxes, and Discount Rates (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cdl:anderf:qt7dx622kj
Access Statistics for this paper
More papers in University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA Contact information at EDIRC.
Bibliographic data for series maintained by Lisa Schiff (help@escholarship.org).