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Optimal investment and financial strategies under tax rate uncertainty

  • Alessandro Fedele
  • Paolo Panteghini
  • Sergio Vergalli

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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Paper provided by University of Brescia, Department of Economics in its series Working Papers with number 0912.

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Date of creation: 2009
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Handle: RePEc:ubs:wpaper:0912
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