Tables 18.3(a) and 18.3(b), although pertaining to a real company, are really just a simplified numerical example. What factors would you expect to determine the value of interest tax shields in practice'not just for Pfizer, but for a range of companies with different profitability, risk, and types of business?

Transcribed Image Text:

Table 18.3(a) Book Values $ 5,206 16,323 $ 1,123 4,330 Net working capital Long-term assets Long-term debt Other long-term liabilities 16,076 $ 21,529 Equity Total value $ 21,529 Total assets Market Values $ 5,206 $ 1,123 4,330 Net working capital Long-term debt Other long-term liabilities Market value of long- 290,691 $295,897 290,444 $295,897 Equity Total value term assets Total assets Table 18.3(b) Book Values $ 5,206 16,323 $ 2,123 Long-term debt Other long-term liabilities Equity Total value Net working capital Long-term assets 4,330 15,076 $ 21,529 $ 21,529 Total assets Market Values $ 5,206 $ 2,123 4,330 Net working capital Long-term debt Other long-term liabilities Market value of long-term assets 291,041 $296,247 289,794 $296,247 Equity Total value Total assets