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The Role of the Tax Shield in Business Valuation
The Role of the Tax Shield in Business Valuation
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Guest
Guest
Feb 19, 2025
6:41 AM
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The tax shield refers to the financial advantage that companies gain from debt financing due to the tax deductibility of interest expenses. By deducting interest payments from taxable income, businesses can lower their overall tax burden, reducing the cost of capital and ultimately increasing their valuation. This benefit enhances the financial appeal of debt financing over equity funding. Additionally, businesses may consider utilizing a Tax advance to manage cash flow and ensure they can take full advantage of tax shields, further optimizing their financial strategies.
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