Comment on 'The Value of Tax Shields is NOT Equal to the Present Value of Tax Shields', Including an Arbitrage Opportunity

Nicholas X. Wonder (), Paul Fieten (), Lutz Kruschwitz () and Y Otros (ver Lista Abajo)

No 2163, Proyecciones Financieras y Valoración from Master Consultores

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 and provide an example where his valuation would admit arbitrage.

Keywords: Present value of tax shield; perpetuities (search for similar items in EconPapers)
JEL-codes: G31 G32 H43 (search for similar items in EconPapers)
Pages: 5
Date: 2003-12-31
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:col:000463:002163

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