Calculating the market value of riskless cash flows |
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| Affiliation: | 1. G.S.Pisarenko Institute for Problems of Strength, National Academy of Sciences of Ukraine, Kyiv, Ukraine;2. G.V.Kurdyumov Institute for Metal Physics, National Academy of Sciences of Ukraine, Kyiv, Ukraine;2. Rolls-Royce plc, Materials & Process Modelling, PO Box 31, Derby DE24 8BJ, UK;1. School of Photovoltaic and Renewable Energy Engineering, University of New South Wales, Sydney, New South Wales 2052, Australia;2. School of Mechanical Engineering, University of New South Wales, Sydney, New South Wales 2052, Australia;1. ETH Zurich, Department of Environmental Systems Science (D-USYS), USYS Transdisciplinarity Laboratory, Universitaetstrasse 16, 8092 Zurich, Switzerland;2. ETH Zurich, Swiss Seismological Service, Sonneggstrasse 5, 8092 Zurich, Switzerland;3. Swiss Competence Center for Energy Research − Supply of Electricity, Sonneggstrasse 5, 8092 Zurich, Switzerland;1. School of Maths & Stats, Zhengzhou University, Zhengzhou, Henan, 450001, China;2. Dept. of Maths & Stats, Univ. of Calgary, 2500 University Drive, NW, AB, T2N 1N4, Canada;3. School of Digital Media, Jiangnan University, Wuxi, Jiangsu, 214122, China;4. Institute of Risk Management, Dept. of Maths, Tongji University, Shanghai, 200092, China;5. Dept. of Electrical and Computer Engineering, The University of Texas at Austin, Texas, 78705, USA |
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| Abstract: | This paper uses arbitrage arguments to calculate the market value of riskless after-tax cash flows. The market value equals the present value of riskless after-tax cash flows discounted at the after-corporate-tax riskless interest rate. The market value equals the adjusted present value of riskless after-tax cash flows only when the incremental debt used in the adjusted present value calculations equals the market value of the remaining after-tax cash flows. Also, the analysis provides valuation formulas when interest and tax rates are certain but not uniform and when interest rates are uncertain. |
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