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The tax shield as present value of debt-related tax savings plays an important role in firm valuation. Driving the risk of future debt levels, the firm’s strategy to adjust the absolute debt level to future changes of the firm value, labeled as (re-) financing policy, affects the value of tax shields. Standard discounted cash flow (DCF) models offer two simplified (re-) financing policies originally introduced by Modigliani and Miller (MM) as well as Miles and Ezzell (ME). In this paper, we introduce a discontinuous financing policy that refers to the refinancing intervals, i.e., the maturity structure of the firm’s debt. By deriving APV valuation and beta unlevering equations that allow for this discontinuous financing policy, we show the MM and ME policies to be special cases of the proposed extension. While we document the effect of discontinuous refinancing to be economically significant when leverage is high and refinancing periods are extremely long, our results suggest that for low-levered firms with short refinancing periods, the traditional continuous refinancing-based models (like the Miles/Ezzell model) produce relatively robust value estimates. Combining capital structure and maturity structure choices, our model extends the set of feasible financing policies in DCF valuation models.
In this paper we develop a model to value debt related tax savings and associated yield rates for debt in a setting where future cash flows are uncertain and follow a stochastic diffusion process. By explicitly modeling a default trigger we find that tax shield values in standard Discounted Cash Flow (DCF) valuation formulas are too high as they do not correctly incorporate the risk of default. Furthermore, we are able to endogenously derive risk-adjusted yield rates, while keeping the overall simple and tractable structure of the DCF approach.
Der Lehrstuhl Finanzmanagement und Banken an der Handelshochschule Leipzig ermittelt seit 2006 vierteljährlich Multiplikatoren, Betafaktoren und Eigenkapitalkosten für den deutschen Kapitalmarkt und stellt diese auf der Internetseite www.finexpert.info zur Verfügung. Diese Daten wurden seit Beginn ebenfalls auszugsweise in den Fachzeitschriften "CORPORATE FINANCE biz" und "Bewertungspraktiker" veröffentlicht. Im vorliegenden Beitrag werden die Datengrundlage, die Definition von verwendeten Größen und die Berechnungsmethode transparent und nachvollziehbar dargestellt.