European Business Schools Librarian's Group
SSE/EFI Working Paper Series in Business Administration,
Stockholm School of Economics
No 2004:8: Loan Subsidy Valuation
L. Peter Jennergren ()
Additional contact information
L. Peter Jennergren: Dept. of Business Administration, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Abstract: Loan subsidies are sometimes offered in connection with investment projects. It is convenient to view such subsidies as financing side effects providing value additions to project net present values without loan subsidies. A number of different methods for loan subsidy valuation have been suggested in the literature and by project appraisal practice. Four methods are outlined and applied to a subsidized loan example taken from a prominent text book. A combination of two of those methods is recommended for practical applications. The other two methods are not recommended.
Keywords: Subsidized loans; valuation; tax shields
16 pages, May 25, 2004
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