%0 Journal Article
%T A Simple Accounting-based Valuation Model for the Debt Tax Shield
%A Andreas Scholze
%J BuR : Business Research
%D 2010
%I Verband der Hochschullehrer f¨¹r Betriebswirtschaft e.V.
%X This paper describes a simple way to integrate the debt tax shield into an accounting-based valuation model. The market value of equity is determined by forecasting residual operating income, which is calculated by charging operating income for the operating assets at a required return that accounts for the tax benefit that comes from borrowing to raise cash for the operations. The model assumes that the firm maintains a deterministic financial leverage ratio, which tends to converge quickly to typical steady-state levels over time. From a practical point of view, this characteristic is of particular help, because it allows a continuing value calculation at the end of a short forecast period.
%K corporate income tax
%K cost of capital
%K debt tax shield
%K equity valuation
%K financial leverage
%K financial statement analysis
%K residual income valuation
%K Feltham-Ohlson framework
%U http://www.business-research.org/2010/1/accounting/2503/hihrig1274249781.28.pdf