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Old 10-31-2003, 12:34 PM
dion dion is offline
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Default Present Value of Tax Shield

What is/are the formula(s) for calculating the present value of tax sheilds?
I thought when debt was fixed that the PV(TaxShield)=(rd(D)(Tc))/r and if debt was rebalanced then PV(TaxShield)=(rd(D)(TC))/r)*((1+r)/(1+rd)). Is this incorrect?
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Old 10-31-2003, 03:43 PM
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Purple Princess Purple Princess is offline
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close....

for fixed debt it is

PV(TaxShield)=(rd(D)(Tc))/rd

for debt rebalanced, though I have trouble with that formula, I think it's

PV(TaxShield)=(rd(D)(TC))/rd)*((1+r)/(1+rd))
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