The Impact of Profit Taxation on CapitalizedInvestment with Options to Delay and Divest

In entrepreneurial decisions making uncertain future prots often are a maincharacteristics of real investment opportunities. If investors can react touncertainty the degree of irreversibility and timing flexibility inherent in theavailable project should be integrated into the decision calculus. In this paperwe investigate the interdependencies of effects from prot taxation and realoptions. We model an investment decision including an option to invest andan option to abandon. We show that increasing the tax rate can lead toparadoxical tax effects, i.e. may foster an investor's willingness to investinto a capitalized investment.[...]