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Optimal Investment and Financial Strategies under Tax‐Rate Uncertainty

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  • Alessandro Fedele
  • Paolo M. Panteghini
  • Sergio Vergalli

Abstract

In this paper we apply a real-option model to study how tax rate uncertainty affects a firm's decisions about both the timing and the source of finance of an investment project. We show that debt finance (i) encourages entry and (ii) mitigates the e¤ect of tax rate uncertainty on entry timing.

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File URL: http://hdl.handle.net/10.1111/j.1468-0475.2010.00529.x
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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 12 (2011)
Issue (Month): 4 (November)
Pages: 438-468

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Handle: RePEc:bla:germec:v:12:y:2011:i:4:p:438-468

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Cited by:
  1. Alberto Bisin & John Geanakoplos & Piero Gottardi & Enrico Minelli & Heracles Polemarchakis, 2009. "Markets and Contracts," Working Papers 0915, University of Brescia, Department of Economics.
  2. Monica Billio & Roberto Casarin, 2010. "Bayesian Estimation of Stochastic-Transition Markov-Switching Models for Business Cycle Analysis," Working Papers 1002, University of Brescia, Department of Economics.
  3. Alessandro Fedele & Francesco Liucci & Andrea Mantovani, 2009. "Credit availability in the crisis: the European investment bank group," Working Papers 0913, University of Brescia, Department of Economics.
  4. Martin Meier & Enrico Minelli & Herakles Polemarchakis, 2014. "Competitive markets with private information on both sides," Economic Theory, Springer, vol. 55(2), pages 257-280, February.

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