A Simple Accounting-based Valuation Model for the Debt Tax Shield

Artikel

This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that accounts for the tax benefit that comes from borrowing to raise cash for the operations. The model assumes that the firm maintains a deterministic financial leverage ratio, which tends to converge quickly to typical steady-state levels over time. From a practical point of view, this characteristic is of particular help, because it allows a continuing value calculation at the end of a short forecast period.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: BuR - Business Research ; ISSN: 1866-8658 ; Volume: 3 ; Year: 2010 ; Issue: 1 ; Pages: 37-47 ; Göttingen: VHB - Verband der Hochschullehrer für Betriebswirtschaft, German Academic Association of Business Research

Classification and Topics

• Classification: Management
• Subject: corporate income tax ; cost of capital ; debt tax shield ; equity valuation ; financial leverage ; financial statement analysis ; residual income valuation ; Feltham-Ohlson framework ; Bilanzanalyse ; Steuervergünstigung ; Fremdkapital ; Kapitalkosten ; Residualgewinn ; Operations Research

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Scholze, Andreas
• Event: Veröffentlichung
• (who): VHB - Verband der Hochschullehrer für Betriebswirtschaft, German Academic Association of Business Research
• (where): Göttingen
• (when): 2010

Further information

• DOI: doi:10.1007/BF03342714
• Handle: http://hdl.handle.net/10419/103685
• URN: urn:nbn:de:0009-20-25039