RAD 110 Lecture Notes - Lecture 9: Dividend Discount Model, Tax Rate, Tax Shield

• School: St. Clair College
• Department: Radiologic Technology
• Course: RAD 110
• Professor: sam fddg

Document Summary

S = min [resale value, original price of assets]; c = original price d = cca depreciation rate; k = discount rate n = time assets sold; tc=marginal tax rate. Relationship between betas of firm"s debt, equity, and assets. Net present value of growth opportunities (standard form) one year before first investment r. Dividend discount model with two growth rates (standard form) Levered and unlevered cost of equity (no taxes) rb is the interest rate (cost of debt) rs is the return on (levered) equity (cost of equity) r0 is the return on unlevered equity (cost of capital) Levered and unlevered cost of equity (with taxes) r. S rb is the interest rate (cost of debt) rs is the return on equity (cost of equity) r0 is the return on unlevered equity (cost of capital) C0 = the value of a european option at time t = 0. 2 = variance (per year) of continuous return on stock.