The impact of personal taxes on the firm's weighted average cost of capital and investment behaviour: a simplified approach using the Dempsey discounted dividends model

Article Abstract:

A study was conducted to evaluate the Dempsey discounted dividends model with regard to its effectiveness in providing a weighted average cost of capital assessment opportunities with irregular cash flows. The implications of government policy on investor personal taxes and its effects on the firm's investment behavior were also analyzed. The model showed that the level of dividend taxes affected the investment behavior of different UK companies. The model was considered reliable in determining the impact of personal taxes on various firms' activities.

Evaluation, Dividends, Investments, Cash flow

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The cost of equity capital at the corporate and investor levels allowing a rational expectations model with personal taxations

Article Abstract:

It is argued that there is a probability that the conventional definition of the cost of equity at the corporate level is defective under conditions of personal taxation. Based on the works of Auerbach (1979) and Elton and Gruber (1970), a 'dimensionally consistent' definition is developed. It provides simple expressions for the cost of equity capital at both the corporate and investor levels. It offers a basic model for understanding the impact of investor personal tax liabilities on corporate investment and related dividend policies.

Rational expectations (Economics)

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Valuation and cost of capital formulae with corporate and personal taxes: a synthesis using the Dempsey discounted dividends model

Article Abstract:

Research is presented concerning the introduction of leverage in Dempsey's cost of capital framework model (1996 and 1998). Its application to imputation and classical taxation systems is discussed.

Research, Infrastructure (Economics), Leverage (Finance), Leverage, Capital productivity

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