Optimal Investment and Financial Strategies under Tax Rate Uncertainty

Alessandro Fedele, Paolo Panteghini and Sergio Vergalli

No 91001, Institutions and Markets Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: 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 projects. 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.

Keywords: Financial; Economics (search for similar items in EconPapers)
Pages: 34
Date: 2010-06
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https://ageconsearch.umn.edu/record/91001/files/NDL2010-068.pdf (application/pdf)

Related works:
Journal Article: Optimal Investment and Financial Strategies under Tax‐Rate Uncertainty (2011)
Journal Article: Optimal Investment and Financial Strategies under Tax-Rate Uncertainty (2011)
Working Paper: Optimal Investment and Financial Strategies under Tax Rate Uncertainty (2010)
Working Paper: Optimal Investment and Financial Strategies under Tax Rate Uncertainty (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemim:91001

DOI: 10.22004/ag.econ.91001

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