The Tax Cut and Jobs Act of 2017 lowered the marginal corporate federal tax rate to 21%, and all of a sudden, things just aren’t the same anymore. At first blush, the impact of the recent tax cut is straightforward. Lower taxes mean higher after-tax cash flows, which should translate into higher values for businesses. But how much higher? Value is a function of expected cash flows, expected risk, and expected growth. While expected cash flow (after-tax) will be rising following the corporate tax cut, what happens to expected risk and expected growth?
The Tax Cuts and Jobs Act of 2017 was signed into law by President Trump on December 22, 2017. President Trump calls the bill the biggest tax cut in American history, and there were substantial reductions in both corporate and personal income tax rates. The tax reduction act will impact C corporations as well as pass-through entities. This post focuses only on C corporations and looks at the marginal impact of the change.
Over the years, I have been called upon to review the work of other appraisers and damages experts. To a certain extent, the requirements for appraisal review come with the territory of being an expert witness. Appraisers for a side in litigation are often asked to review the work of the opposing expert. In the […]
The idea of normalizing Treasury yields when building up equity discount rates has been around for about a decade. I do not believe that “normalizing” Treasury rates when building up discount rates is a procedure that should be used by business appraisers. This post provides the rationale for this position.