The Value of Tax Shields is Not Equal to the Present Value of Tax Shields

By Pablo Fernández. 2004

181 citations recorded by the source corpus.

Subfields: Accounting, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/8307ba8172eb96eaca9e415feb3b9a38050355d7

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In Accounting

1. A. Damodaran

In Strategy and Management

1. A. Damodaran

Citations in the corpus

• Valuation Approaches and Metrics: A Survey of the Theory and Evidence (2007, background): “Fernandez (2004) argued that the value of tax benefits should be computed as the difference between the value of the levered firm, with the interest tax savings, and the value of the same firm without leverage.”
• A Reconsideration of Tax Shield Valuation (2005, unknown): “…¼ ðFCFt þNINVtÞt=ð1 tÞ ð7Þ TaxesLt ¼ ðEFCt þNINVt þ PPtÞt=ð1 tÞ: ð8Þ Letting Gu and GL denote the value of these cash flows, respectively, it is immediate that Vu þ Gu ¼ VL þ GL; and hence VTS ¼ Gu GL: ð9Þ Fernandez (2004) points out that the tax cash flows should be discounted at different rates.”