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Cost of Capital with Levered Cost of Equity as the Risk of Tax Shields

Listed author(s):
  • Joseph Tham

    ()

  • Ignacio Velez Pareja

    ()

We present the derivation of cost of capital under the assumption of risky tax shields discounted with the cost of levered equity. We show that the formulation is consistent and is derived from basic financial principles. This formulation is valid for finite cash flows and non growing perpetuities. In addition, it can be calculated without the circularity between value and discount rate.

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File URL: http://ssrn.com/abstract=1655244
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Paper provided by MASTER CONSULTORES in its series PROYECCIONES FINANCIERAS Y VALORACION with number 007315.

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Length: 7
Date of creation: 22 Aug 2010
Handle: RePEc:col:000463:007315
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