The net present value of any loan at is 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 capital equal to its own after tax discount rate and remains a zero in terms of its own net present value.
© 2014 Science and Education Publishing
Available online at http://pubs.sciepub.com/jfe/2/3/2
This work is licensed under a Creative Commons Attribution 4.0 International License.
Charles Higgins, “An After Tax Valuation of Debt Instruments.” Journal of Finance and Economics, vol. 2, no. 3 (2014): 67-69. doi: 10.12691/jfe-2-3-2.