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| Author: | Strong, N. C. Appleyard, T. R. |
| Title: | Investment appraisal, taxes and the security market line. |
| Journal: | Journal of Business Finance and Accounting
1992 : JAN, VOL. 19:1, p. 1-24 |
| Index terms: | INVESTMENT ANALYSIS TAXATION CAPITAL STRUCTURE OF COMPANIES STOCK MARKETS FINANCIAL MODELS |
| Language: | eng |
| Abstract: | This paper provides a unified treatment of investment appraisal under different tax regimes and capital structure equilibria. This serves to clarify the often imprecise and unclear treatment of the subject given in the literature. A number of new results are presented. The most significant result of the paper is to restore the use of the weighted average cost of capital (WACC) as the predominant approach to investment appraisal. The paper also stresses the importance of maintaining consistency in discounting cash flows that are calculated after corporate tax at an after-corporate-tax but before-personal- tax discount rate. |
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