Final answer:
To determine the valuation of business assets, add the present value of existing tax shields and the net realizable value of redundant assets, then subtract redundant liabilities.
Step-by-step explanation:
The question deals with the valuation of a company's assets and liabilities in the context of business finance. To determine the present value of the company's tax shields and assets, you need to take the following steps:
- Add the present value of the existing tax shield on existing assets. This value represents the savings in taxes that a company can expect to receive from its allowable deductions from taxable income.
- Add the net realizable value of redundant assets. Redundant assets are those not required in the company's ongoing operations and might be sold; their net realizable value is the estimated selling price in the ordinary course of business, less any costs expected to be incurred to make the sale.
- Subtract redundant liabilities. These are obligations of the business that may no longer provide a future benefit or are in excess of what is needed for operations.
Thus, the correct approach integrates financial analysis tools, like the present discounted value, closely concerning the decision-making process in investments, whether in business or governmental policies.