Optimal Investment and Financial Strategies under Tax Rate Uncertainty

In this paper we apply a real-option model to study the effects of tax rate uncertainty on a firm's decisions. In doing so, we depart from the relevant literature, which focuses on fully equity-financed investment project. By letting a representative firm borrow optimally, we show that debt finance not only encourages investment activities but can also substantially mitigate the effect of tax rate uncertainty on investment timing.

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Year of publication:	2010
Authors:	Fedele, Alessandro ; Panteghini, Paolo M. ; Vergalli, Sergio
Publisher:	Munich : Center for Economic Studies and ifo Institute (CESifo)
Subject:	Betriebliche Investitionspolitik \| Zeit \| Kapitalstruktur \| Realoption \| Unternehmensbesteuerung \| Entscheidung bei Unsicherheit \| Theorie \| capital levy \| corporate taxation \| default risk \| real options

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Series:	CESifo Working Paper ; 3017
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	626395186 [GVK] hdl:10419/38888 [Handle]
Classification:	H25 - Business Taxes and Subsidies
Source:	EconStor

Persistent link: https://www.econbiz.de/10010276151