A Simple Explanation for the Unfavorable Tax Treatment of Investment Costs

The evidence shows that in most countries the present value of depreciation allowances is less than 100% of the cost of capital. In this article we use a real-option model with debt financing, and show that less favorable depreciation allowances are offset by tax benefits arising from debt financing. Allowing partial deduction of capital cost is thus a necessary condition for investment neutrality to hold

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Year of publication:	[2006]
Authors:	Panteghini, Paolo
Publisher:	[2006]: [S.l.] : SSRN

Extent:	1 Online-Ressource (17 p)
Series:	CESifo Working Paper Series ; No. 1784
Type of publication:	Book / Working Paper
Notes:	Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 2006 erstellt
Other identifiers:	10.2139/ssrn.932489 [DOI]
Classification:	D92 - Intertemporal Firm Choice and Growth, Investment, or Financing ; G12 - Asset Pricing ; G33 - Bankruptcy; Liquidation ; H25 - Business Taxes and Subsidies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10012779345