search query: @indexterm Growth / total: 1010
reference: 72 / 1010
| Author: | Massari, M. Roncaglio, F. Zanetti, L. |
| Title: | On the equivalence between the APV and the wacc approach in a growing leveraged firm |
| Journal: | European Financial Management
2008 : JAN, VOL. 14:1, p. 152-162 |
| Index terms: | finance valuation growth models companies taxation |
| Freeterms: | tax-shields |
| Language: | eng |
| Abstract: | This paper proposes a simple model in order to evaluate the tax savings in a growing firm to show under which assumptions the two approaches lead to the same results. It is shown that the use of the wacc model in a steady-growth scenario gives rise to some unusual assumptions as to the discount rates to be used in calculating tax shields. It is shown that the widely used wacc formula, if used in a growth context, implies that a) debt tax shield related to already existing debt are discounted using k(d), b) debt tax shield related to new debt, due to company's growth, are discounted, according to a mixed procedure, using both k(u) and k(d). |
SCIMA