Valuation, leverage and the cost of capital in the case of depreciable assets

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Valuation, leverage and the cost of capital in the case of depreciable assets

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dc.contributor.author Lund, Diderik en_US
dc.date.accessioned 2009-02-04T10:27:47Z
dc.date.available 2009-02-04T10:27:47Z
dc.date.issued 2003-10-21T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/7583
dc.description.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 en_US
dc.format.extent 22 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2003-3 en_US
dc.subject.other kapitalomkostninger en_US
dc.subject.other afskrivning en_US
dc.subject.other selskabsskatter en_US
dc.title Valuation, leverage and the cost of capital in the case of depreciable assets en_US
dc.type wp en_US
dc.accessionstatus modt03okt21 inrumo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Nationaløkonomi en_US
dc.contributor.departmentshort ECON en_US
dc.contributor.departmentuk Department of Economics en_US
dc.contributor.departmentukshort ECON
dc.idnumber x656102526 en_US
dc.publisher.city København en_US
dc.publisher.year 2003 en_US
dc.title.subtitle Revisited en_US


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