De and re-levering betas with risky debt
De- and re-levering betas is important to obtain discount rates for assets that are not publicly traded. A de- and re-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying assumptions. In this paper, I concretize and...
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| Tác giả chính: | |
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| Định dạng: | BB |
| Ngôn ngữ: | en_US |
| Thông tin xuất bản: |
Springer Nature
2020
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| Chủ đề: | |
| Truy cập trực tuyến: | https://doi.org/10.1007/s40685-018-0066-2 http://tailieuso.tlu.edu.vn/handle/DHTL/9408 |
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| Tóm tắt: | De- and re-levering betas is important to obtain discount rates for assets that are not publicly traded. A de- and re-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying assumptions. In this paper, I concretize and extend the procedure for deand re-levering of betas for companies with risky debt. I derive procedures for different assumptions on the taxation of a cancellation of debt (COD) and for different assumptions regarding the distribution of losses on interest and principal payments. With a tax on the COD I obtain known results. However, without taxes on a COD, the distribution of losses on interest and principal payments matters and equations differ markedly for different assumptions on the assignment of losses to interest and principal payments. Furthermore, using a procedure that does not fit the COD treatment is likely to lead to substantial deviations for de- and re-levered betas from their correct values. |
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