Body Composition and Serum Prostate-Specific Antigen: Review and Findings from Flint Men’s Health Study

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• 作者：Jennifer L. Beebe-Dimmer ; Gary J. Faerber ; Hal Morgenstern ; David Werny ; Kirk Wojno ; Bronwen Halstead-Nussloch ; Kathleen A. Cooney
• 关键词：WACC ; Discount rate ; Tax shields ; Corporate tax
• 刊名：Urology
• 出版年：2008
• 出版时间：April 2008
• 年：2008
• 卷：71
• 期：4
• 页码：554-560
• 全文大小：154 K

文摘

This paper applies the standard risk-neutral valuation framework to tax shields generated by dynamic debt policies. We derive a partial differential equation (PDE) for the value of the debt tax shield. For a class of dynamic debt policies that depend on the asset's free cash flows, value, and past performance, we obtain closed-form solutions for the PDE. We also derive the tax-adjusted cost of capital for free cash flows and analyze the conditions under which the weighted average cost of capital is an appropriate discount rate. Finally, we derive closed-form solutions for equity betas, which differ from the formulas that have traditionally been used to lever and unlever equity betas.