Valuing the Government's Tax Claim on Risky Corporate Assets / Saman Majd, Stewart C. Myers.

Format:

Book

Author/Creator:

Majd, Saman.

Contributor:

National Bureau of Economic Research.

Myers, Stewart C.

Series:

Working Paper Series (National Bureau of Economic Research) no. w1553.

NBER working paper series no. w1553

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1985.

Summary:

This paper explores the effects of tax asymmetries on the value of risky capital investments made by corporations.The government's claim on the firm is shown to be equivalent to a portfolio of options on the firm's revenues. The tax law's provisions for carrying tax losses forward and backward are introduced, necessitating a numerical solution for the value ofthe government's claim. The results show that asymmetric taxation of operating gains and losses can significantly affect the after-tax net present value of corporate investment opportunities.

Notes:

Print version record

February 1985.