Journal of Finance and Economics
ISSN (Print): 2328-7284 ISSN (Online): 2328-7276 Website: http://www.sciepub.com/journal/jfe Editor-in-chief: Suman Banerjee
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Journal of Finance and Economics. 2014, 2(3), 67-69
DOI: 10.12691/jfe-2-3-2
Open AccessResearch Article

An After Tax Valuation of Debt Instruments

Charles Higgins1,

1Department Finance/CIS, Loyola Marymount University, 1 LMU Dr, Los Angeles, CA

Pub. Date: March 16, 2014
(This article belongs to the Special Issue Multinational Capital Budgeting)

Cite this paper:
Charles Higgins. An After Tax Valuation of Debt Instruments. Journal of Finance and Economics. 2014; 2(3):67-69. doi: 10.12691/jfe-2-3-2

Abstract

The net present value of any loan at its own discount rate is shown to be zero in both pre tax and after tax worlds. This allows separation from any investment net present value analysis. Further, it simplifies the analysis and it is argued is appropriate even in weighted average cost of capital scenarios wherein the cost of a loan has a marginal cost of capital equal to its own after tax discount rate and remains a zero in terms of its own net present value.

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