Tax shield - Revision history

Doug: Improve linking.

2025-09-20T16:19:44Z

Improve linking.

2022-07-06T09:21:23Z

Add link.

← Older revision		Revision as of 09:21, 6 July 2022
Line 92:		Line 92:
	* [[Perpetuity]]		* [[Perpetuity]]
	* [[Preference shares]]		* [[Preference shares]]
			* [[Tax ]]
	* [[Tax relief]]		* [[Tax relief]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2021-06-03T17:27:18Z

Add link.

2021-05-30T11:52:45Z

Add link.

← Older revision		Revision as of 11:52, 30 May 2021
Line 91:		Line 91:
	* [[Perpetuity]]		* [[Perpetuity]]
	* [[Preference shares]]		* [[Preference shares]]
			* [[Tax relief]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2021-01-10T17:21:36Z

Add links.

← Older revision		Revision as of 17:21, 10 January 2021
Line 88:		Line 88:
	* [[Cost of capital]]		* [[Cost of capital]]
	* [[Gearing]]		* [[Gearing]]
			* [[Ordinary shares]]
	* [[Perpetuity]]		* [[Perpetuity]]
			* [[Preference shares]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2018-09-04T10:25:07Z

Clarify valuation method in definition 2.

← Older revision		Revision as of 10:25, 4 September 2018
Line 53:		Line 53:
	More narrowly, the total present value of all of the expected future related cash flow benefits arising from the use of debt.		More narrowly, the total present value of all of the expected future related cash flow benefits arising from the use of debt.

	The total present value of the expected future cash flow benefits from the tax savings can be quantified/estimated by capitalising the annual saving at the pre-tax cost of debt as a fixed perpetuity using the perpetuity factor 1 / Kd.		The total present value of the expected future cash flow benefits from the tax savings can be quantified/estimated by capitalising the annual saving at the pre-tax cost of debt.

			A simple estimate values the cash flow benefits as a fixed perpetuity, using the perpetuity factor 1 / Kd.


Line 82:		Line 84:
	== See also ==		== See also ==
	* [[Adjusted present value]]		* [[Adjusted present value]]
			* [[Corporation Tax]]
			* [[Cost of debt]]
	* [[Cost of capital]]		* [[Cost of capital]]
	* [[Gearing]]		* [[Gearing]]
			* [[Perpetuity]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2018-09-02T13:16:42Z

Identify and differentiate gross taxable profits deduction and tax saving.

← Older revision		Revision as of 13:16, 2 September 2018
Line 28:		Line 28:
	= 100 x 0.05		= 100 x 0.05

	= $5m.		= $5m annual interest charge, reducing annual taxable profits by $5m

	~~Then~~:		Related annual tax saving:

	= 5 x 0.28		= $5m x 28% tax rate

	= $1.4m.		= $1.4m.

2017-09-20T09:11:07Z

Link with Gearing page.

← Older revision		Revision as of 09:11, 20 September 2017
Line 83:		Line 83:
	* [[Adjusted present value]]		* [[Adjusted present value]]
	* [[Cost of capital]]		* [[Cost of capital]]
			* [[Gearing]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]

2016-01-15T19:30:24Z

Improve calculations.

← Older revision		Revision as of 19:30, 15 January 2016
Line 12:		Line 12:


	Annual tax-deductible debt servicing costs paid ( D x Kd ) x relevant rate of corporation tax (t)		Annual tax-deductible debt servicing costs paid (D x Kd) x relevant rate of corporation tax (t)


Line 42:		Line 42:
	<span style="color:#4B0082">'''Example 2'''</span>		<span style="color:#4B0082">'''Example 2'''</span>

	= 5% x ( 1 - 0.28 )		= 5% x (1 - 0.28)

	= 3.6%.		= 3.6%.
Line 65:		Line 65:
	Total present value of tax shield:		Total present value of tax shield:

	= 1.4 x ( 1 / 0.05 )		= 1.4 x (1 / 0.05)

	= $28m.		= $28m.

2015-11-13T15:09:03Z

Colour change of example headers

← Older revision		Revision as of 15:09, 13 November 2015
Line 15:		Line 15:


	'''Example 1'''		<span style="color:#4B0082">'''Example 1'''</span>

	D = Debt, for example $100m.		D = Debt, for example $100m.
Line 40:		Line 40:


	'''Example 2'''		<span style="color:#4B0082">'''Example 2'''</span>

	= 5% x ( 1 - 0.28 )		= 5% x ( 1 - 0.28 )
Line 56:		Line 56:


	'''Example 3'''		<span style="color:#4B0082">'''Example 3'''</span>

	Annual saving = $1.4m		Annual saving = $1.4m
Line 73:		Line 73:


	'''Example 4'''		<span style="color:#4B0082">'''Example 4'''</span>

	= 100 x 0.28		= 100 x 0.28