IDEAS home Printed from https://ideas.repec.org/a/sbr/abstra/v56y2004i1p20-45.html
   My bibliography  Save this article

Valuation With Or Without Personal Income Taxes?

Author

Listed:
  • Frank Richter

Abstract

This paper reviews different schools of thought on the question of if and how personal taxes should be incorporated into the valuation of companies or projects. The paper shows under which conditions the risk-neutral valuation approach yields the same result as the Tax-CAPM. Special cases are analyzed that imply irrelevance of personal taxes. In addition, empirical questions are addressed, such as how to determine the expected market rate of return after personal taxes. For this purpose current market prices are used in combination with cash-flow forecasts of financial analysts. Finally, a view is presented on the precision required to estimate the personal tax rate. If both the investment opportunity and its alternative are similarly tax affected, then relative values should not change too much as a function of the tax rate. However, common sensitivity analyses indicate the opposite.

Suggested Citation

  • Frank Richter, 2004. "Valuation With Or Without Personal Income Taxes?," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 56(1), pages 20-45, January.
    • Handle: RePEc:sbr:abstra:v:56:y:2004:i:1:p:20-45
    as

    Download full text from publisher

    File URL: http://www.vhb.de/sbr/pdfarchive.html
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rainer Niemann & Mariana Sailer, 2023. "Is analytical tax research alive and kicking? Insights from 2000 until 2022," Journal of Business Economics, Springer, vol. 93(6), pages 1149-1212, August.
    2. Simon Krotter & Andreas Schüler, 2013. "Empirische Ermittlung von Eigen-, Fremd- und Gesamtkapitalkosten: eine Untersuchung deutscher börsennotierter Aktiengesellschaften," Schmalenbach Journal of Business Research, Springer, vol. 65(5), pages 390-433, September.
    3. Ronald W. Spahr & Pankaj K. Jain & Fariz Huseynov & Bhavik Rajesh Parikh, 2012. "Tax policy and macro-finance in a competitive global economy where government is considered as firms' third financial stakeholder," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 14(1/2), pages 30-66.

    More about this item

    Keywords

    Asset Pricing Theory; Taxes; Valuation.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sbr:abstra:v:56:y:2004:i:1:p:20-45. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: sbr (email available below). General contact details of provider: https://edirc.repec.org/data/fbmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.