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Capital budgeting, valuation and personal taxes

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  • Ian Dobbs
  • Anthony Miller

Abstract

This paper examines the relationship between before tax and after tax valuation and uses this to examine the literature on capital budgeting and capital structure in the presence of corporate and personal taxes, a literature which features a bewildering array of valuation formulae. Some of the variation between such formulae naturally arises out of variations in underlying model assumptions; however, in several cases, it arises because there are (by no means obvious) internal inconsistencies. The potential magnitude of the errors that might arise in a capital budgeting context is then explored through sensitivity analysis.

Suggested Citation

  • Ian Dobbs & Anthony Miller, 2002. "Capital budgeting, valuation and personal taxes," Accounting and Business Research, Taylor & Francis Journals, vol. 32(4), pages 227-243.
    • Handle: RePEc:taf:acctbr:v:32:y:2002:i:4:p:227-243
    DOI: 10.1080/00014788.2002.9728972
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    References listed on IDEAS

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