IESE Research Papers
No D/579:
Reply to "Comment on the value of tax shields is NOT equal to the present value of tax shields"
Pablo Fernandez ()
Abstract: The Comment is thought provoking and helps a lot in
rethinking the value of tax shields. However, the conclusion of Fieten,
Kruschwitz, Laitenberger, Löffler, Tham, Vélez-Pareja and Wonder (2005) is
not correct because, as will be proven below, the main result of Fernández
(2004) is correct for several situations. Equation (16a) shows that the
value of tax shields depends only upon the nature of the stochastic process
of the net increase of debt.
Keywords: Value of tax shields; present value of the net increases of debt; (follow links to similar papers)
JEL-Codes: G12; G31; G32; (follow links to similar papers)
8 pages, January 15, 2005
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