Journal of Finance and Economics. 2014, 2(3), 67-69
DOI: 10.12691/jfe-2-3-2
Open AccessResearch Article
Charles Higgins1,
1Department Finance/CIS, Loyola Marymount University, 1 LMU Dr, Los Angeles, CA
Pub. Date: March 16, 2014
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.Keywords:
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