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Definition of Value-added tax
Method of indirect taxation whereby a tax is levied at each stage of production on the value
Same as PV, but usually includes a subtraction for an initial cash outlay.
the value in today’s dollars of cash flows that occur in different time periods.
The net present value analysis of an asset if financed solely by equity
The ratio of net income to net sales.
Money after-tax rate of return minus the inflation rate.
A situation wherein participants in a transaction have different net tax rates.
taxes as a fraction of income; total taxes divided by total taxable income.
The ratio of net income before taxes to net sales.
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
The ratio of stockholder equity to the average number of common shares. Book value
The tax rate at which a party to a prospective transaction is indifferent between entering
Net income plus depreciation.
An amount the insurance company will pay if the policyholder ends a whole life
Also called parity value, the value of a convertible security if it is converted immediately.
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
A non-cash expense that provides a source of free cash flow. Amount allocated during the
Depreciation tax shield
The value of the tax write-off on depreciation of plant and equipment.
Agreement between two countries that taxes paid abroad can be offset against
Earnings before interest and taxes (EBIT)
A financial measure defined as revenues less cost of goods sold
Equivalent taxable yield
The yield that must be offered on a taxable bond issue to give the same after-tax
The amount of advantage over a current market transaction provided by an in-the-money
The weighted average of a probability distribution.
Expected value of perfect information
The expected value if the future uncertain outcomes could be known
Extraordinary positive value
A positive net present value.
See: Par value.
Firm's net value of debt
Total firm value minus total firm debt.
Foreign tax credit
Home country credit against domestic income tax for foreign taxes paid on foreign
The amount of cash at a specified date in the future that is equivalent in value to a specified
Imputation tax system
Arrangement by which investors who receive a dividend also receive a tax credit for
Interest equalization tax
tax on foreign investment by residents of the U.S. which was abolished in 1974.
Interest tax shield
The reduction in income taxes that results from the tax-deductibility of interest payments.
Intrinsic value of an option
The amount by which an option is in-the-money. An option which is not in-themoney
Intrinsic value of a firm
The present value of a firm's expected future net cash flows discounted by the
Investment tax credit
Proportion of new capital investment that can be used to reduce a company's tax bill
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
Net amount that could be realized by selling the assets of a firm after paying the debt.
The amount a policyholder may borrow against a whole life insurance policy at the interest rate
Marginal tax rate
The tax rate that would have to be paid on any additional dollars of taxable income earned.
1) The price at which a security is trading and could presumably be purchased or sold.
Market value ratios
Ratios that relate the market price of the firm's common stock to selected financial
Market value-weighted index
An index of a group of securities computed by calculating a weighted average
Related: par value.
Net adjusted present value
The adjusted present value minus the initial cost of an investment.
Net asset value (NAV)
The value of a fund's investments. For a mutual fund, the net asset value per share
Net book value
The current book value of an asset or liability; that is, its original book value net of any
Net present value (NPV)
The present value of the expected future cash flows minus the cost.
Net present value of growth opportunities
A model valuing a firm in which net present value of new
Net present value of future investments
The present value of the total sum of NPVs expected to result from
Net present value rule
An investment is worth making if it has a positive NPV. Projects with negative NPVs
Net salvage value
The after-tax net cash flow for terminating the project.
Original face value
The principal amount of the mortgage as of its issue date.
Also called the maturity value or face value, the amount that the issuer agrees to pay at the maturity date.
Personal tax view (of capital structure)
The argument that the difference in personal tax rates between
The amount of cash today that is equivalent in value to a payment, or to a stream of payments,
Present value factor
Factor used to calculate an estimate of the present value of an amount to be received in
Present value of growth opportunities (NPV)
Net present value of investments the firm is expected to make
Price value of a basis point (PVBP)
Also called the dollar value of a basis point, a measure of the change in
Progressive tax system
A tax system wherein the average tax rate increases for some increases in income but
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
Current cost of replacing the firm's assets.
Usually refers to the value of a lessor's property at the time the lease expires.
Scrap value of plant and equipment.
Short-term tax exempts
Short-term securities issued by states, municipalities, local housing agencies, and
Split-rate tax system
A tax system that taxes retained earnings at a higher rate than earnings that are
Also called the normal deviate, the distance of one data point from the mean, divided by
Also called investment value, the value of a convertible security without the con-version option.
TANs (tax anticipation notes)
tax anticipation notes issued by states or municipalities to finance current
Tax anticipation bills (TABs)
Special bills that the Treasury occasionally issues that mature on corporate
Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
Tax clawback agreement
An agreement to contribute as equity to a project the value of all previously
Tax differential view ( of dividend policy)
The view that shareholders prefer capital gains over dividends,
The municipal bond market where state and local governments raise funds. Bonds issued
Tax free acquisition
A merger or consolidation in which 1) the acquirer's tax basis in each asset whose
A nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific
Tax Reform Act of 1986
A 1986 law involving a major overhaul of the U.S. tax code.
The reduction in income taxes that results from taking an allowable deduction from taxable income.
Swapping two similar bonds to receive a tax benefit.
Tax deferral option
The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
Tax-deferred retirement plans
Employer-sponsored and other plans that allow contributions and earnings to
The option to sell an asset and claim a loss for tax purposes or not to sell the asset and
A merger or consolidation that is not a tax-fee acquisition. The selling shareholders are
Gross income less a set of deductions.
Any transaction that is not tax-free to the parties involved, such as a taxable acquisition.
The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
Time value of an option
The portion of an option's premium that is based on the amount of time remaining
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar
Two-tier tax system
A method of taxation in which the income going to shareholders is taxed twice.
The welfare a given investor assigns to an investment with a particular return and risk.
Value-at-Risk model (VAR)
Procedure for estimating the probability of portfolio losses exceeding some
Value additivity principal
Prevails when the value of a whole group of assets exactly equals the sum of the
In the market for Eurodollar deposits and foreign exchange, value date refers to the delivery date
Refers to when value or credit is given for funds transferred between banks.
A manager who seeks to buy stocks that are at a discount to their "fair value" and sell them at
A tax levied by a country of source on income paid, usually on dividends remitted to the
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