Browsing by Subject "afskrivning"
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Lund, Diderik (København, 2003)[More information][Less information]
Abstract: Abstract Lund (2002a) showed in a CAPM-type model how tax depreciation schedules affect required expected returns after taxes. Even without leverage higher tax rates implied lower betas when tax deductions were risk free. Here they are risky, and marginal investment is taxed together with inframarginal in an analytical model of decreasing returns. With imperfect loss offset tax claims are analogous to call options. The beta of equity is still decreasing in the tax rate, but increasing in the underlying volatility. The results are important if market data are used to infer required expected returns, and in discussions of tax design. Keywords: Corporate tax, depreciation, imperfect loss offset, decreasing returns, cost of capital, uncertainty URI: http://hdl.handle.net/10398/7643 Files in this item: 1
wpec022003.pdf (341.1Kb) -
RevisitedLund, Diderik (København, 2003)[More information][Less information]
Abstract: Levy and Arditti (1973) introduced depreciable assets into the Modigliani and Miller (1958) model, and analyzed the implications for the cost of capital. Assuming that the firm reinvests indefinitely to maintain a constant expected cash flow, they found that depreciation increases the cost of capital before and after tax. Most of their assumptions are maintained. However, commitment to perpetual reinvestment is in most cases not a reasonable assumption. Without it, depreciation decreases the cost of capital before and after tax. The effect of depreciation is less in absolute value than in Levy and Arditti, but not insignificant. Keywords: Cost of capital, depreciation, corporate taxes JEL classification numbers: G31, H25 URI: http://hdl.handle.net/10398/7583 Files in this item: 1
wpec032003.pdf (138.8Kb)
Now showing items 1-2 of 2