In the literature this incentive is measured as the value of the tax shield
Non-debt tax shield
(NDTS) includes tax advantages a firm received on some sort of investment.
There are some peripheral reasons for this situation like the lack of tax shield
in the region that makes debt less attractive here than in countries with higher levels of interest taxation.
Our analysis, considering bankruptcy costs, reaches a similar conclusion when a dividend tax shield
The fundamental scenario that previous studies used is this: A long-term mortgage borrower can save the interest tax shield
as well as the difference in payments, but a short-term mortgage borrower can start saving after paying off the loan.
To follow it, we first evaluate the project as if an all-equity company were considering it, so we ignore financing side-effects such as the tax shield
Static trade off theory defines optimal capital structure as a balance between the tax shield
benefits derived from debt and the costs of financial distress.
To proxy other control variables, financial ratios such as return on assets (ROA) (profitability), market to book value (growth potential), non debt tax shield
, size (LN(TA)), rate of outstanding shares (use of capital market), total assets growth (growth) and long term asset to total assets (Tangibility of assets) are also used.
Total cost differential between old and new systems will also include depreciation tax shield
allowed for the new equipment.
The amortization expense creates a tax shield
for the acquirer, enhancing the cash flow and value of the reporting unit.
In other words, a firm could never pay the accrued interest and still retain the right to the tax shield
3bn with direct inflows in Italy adding EUR314m, mostly in the final quarter, and partly helped by Italy's tax shield