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Investment Valuation with Tax-optimized Financing Decisions and a Tax-optimized Default Alternative

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Author Info

  • Jochen Hundsdoerfer

    ()
    (Freie Universität Berlin)

  • Lutz Kruschwitz

    ()
    (Freie Universität Berlin)

  • Daniela Lorenz

    ()
    (Freie Universität Berlin)

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    Abstract

    In this paper we evaluate an indivisible investment project that is carried out in a corporation under very simple premises. In particular, we discuss a one-period model with certainty, the pure domestic case and proportional tax rates. Surprisingly, the decision problem turns out to be rather complex if one has to make allowance for different taxation of the corporation and its owner. Altogether there are more than 10 cases that have to be distinguished if the firm's managers want to make a correct decision, depending on the relation of personal and corporate tax rates.

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    File URL: http://www.business-research.org/2008/1/accounting/1390/hundsdoerfer.pdf
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    Bibliographic Info

    Article provided by German Academic Association for Business Research in its journal BuR - Business Research.

    Volume (Year): 1 (2008)
    Issue (Month): 1 (May)
    Pages: 9-24

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    Handle: RePEc:vhb:journl:v:1:y:2008:i:1:p:9-24

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    Related research

    Keywords: dividend distribution decisions; financing policy; investment decisions; payout policy; tax planning;

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    1. Lachmund, Andreas & Kiesewetter, Dirk, 2004. "Wirkungen einer Abgeltungssteuer auf Investitionsentscheidungen und Kapitalstruktur von Unternehmen," Tübinger Diskussionsbeiträge 278, University of Tübingen, School of Business and Economics.
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