Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Business Administration

No 2004:8:
Loan Subsidy Valuation

L. Peter Jennergren ()

Abstract: Loan subsidies are sometimes offered in connection with investment projects. It is convenient to view such subsidies as financing side effects providing value additions to project net present values without loan subsidies. A number of different methods for loan subsidy valuation have been suggested in the literature and by project appraisal practice. Four methods are outlined and applied to a subsidized loan example taken from a prominent text book. A combination of two of those methods is recommended for practical applications. The other two methods are not recommended.

Keywords: Subsidized loans; valuation; tax shields; (follow links to similar papers)

16 pages, May 25, 2004

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This paper is published as:
Jennergren, L. Peter, (2005), 'Loan Subsidy Valuation', The Engineering Economist, Vol. 50, No. 1, pages 69-86

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