Sinopsis
Understand how to value riskless cash flows through the lens of arbitrage and tax shields. This edition explains how the present value of a stream of riskless cash flows can be seen as the minimal amount needed to replicate those flows with riskless securities, using ideas about after‑tax rates and the role of tax shields.
In clear terms, you’ll learn how an equivalent loan constructed with riskless debt can set a lower bound on value. The discussion covers how after‑tax rates, the term structure, and the use of pure discount bonds affect present value calculations. It also compares the after‑tax approach to other valuation methods and shows how tax shields influence the perceived value of cash flows from a project.
- How riskless cash flows are valued using after‑tax rates and tax shields
- When the term structure is uniform versus when rates vary over time
- How pure discount bonds can replicate cash flows under uncertainty
- Connections to adjusted present value concepts and practical implications for valuation
Ideal for readers seeking a rigorous, finance‑focused view of present value and capital budgeting under riskless assumptions.
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Reseña del editor
Excerpt from Calculating the Present Value, of Riskless Cash Flows
In this note I use arbitrage arguments to prove that the minimal present value of a stream of after-tax riskless cash flows is determined by discounting them at the after - tax discount rate. In the proof the firm constructs the arbitrage by issuing riskless debt with after-tax payments that exactly offset the stream of after-tax cash flows being valued. This equivalent loan is feasible since the firm can secure it with the riskless stream of cash inflows. Furthermore, the equivalent loan is an appropriate arbitrage portfolio in the sense that it eliminates changes in the amount of net debt which would otherwise be associated with the project. Net riskless debt is defined as the present value of riskless cash outflows less the present value of riskless cash inflows. Since the outflows of the equivalent loan exactly offset the riskless inflows from the project in each period, the arbitrage proof does not result in any changes in the firm's riskless net debt.
About the Publisher
Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com
This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Reseña del editor
Excerpt from Calculating the Present Value, of Riskless Cash Flows
This paper uses arbitrage arguments to show that the present value of riskless cash flows is determined by discounting then at the after-tax discount race. Present value formulas are derived for riskless cash flows in three cases: (1) uniform interest and tax rates; (11) certain, but not uniform interest and tax rates; and (111) uncertain interest rates- The relation between tho after-tax discount rate approach and the adjusted present value approach is also explored.
About the Publisher
Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com
This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
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Calculating the Present Value, of Riskless Cash Flows (Classic Reprint)
Impresión bajo demandaLibrería: Forgotten Books, London, Reino Unido
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Paperback. Condición: New. Print on Demand. This book centers around the fundamental methods of valuing riskless cash flows after accounting for taxes. The author examines how to calculate present values for riskless cash flows by exploring two methods: discounting at the risk-free interest rate before taxes or after. Through the use of arbitrage arguments, the author demonstrates that the minimal present value for riskless cash flows should be calculated using the after-tax risk-free rate. The author maintains that firms can create an equivalent loan with riskless debt to offset the project's riskless cash inflows. This equivalent loan is feasible and does not result in variations to the firm's riskless net debt, establishing a lower bound on the cash flow's present value. The author highlights that discounting at the after-tax risk-free rate yields the lowest value for the cash flow. This book contributes to the ongoing discussion of debt financing and capital budgeting, providing a framework for more accurate valuation. Its insights enhance our understanding of risk assessment in financial decision-making, making it valuable for investors, financial managers, and students seeking to navigate the complexities of valuing riskless cash flows. This book is a reproduction of an important historical work, digitally reconstructed using state-of-the-art technology to preserve the original format. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in the book. print-on-demand item. Nº de ref. del artículo: 9781332253760_0
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Calculating the Present Value, of Riskless Cash Flows Classic Reprint
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PAP. Condición: New. New Book. Shipped from UK. Established seller since 2000. Nº de ref. del artículo: LW-9781332253760
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Calculating the Present Value, of Riskless Cash Flows Classic Reprint
Librería: PBShop.store UK, Fairford, GLOS, Reino Unido
Calificación del vendedor: 5 de 5 estrellas
PAP. Condición: New. New Book. Shipped from UK. Established seller since 2000. Nº de ref. del artículo: LW-9781332253760
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