| Author: | Ang, J. |
| Title: | Tax asymmetries and the optimal investment decision in the firm. |
| Journal: | Engineering Economist
1987 : WINTER, VOL. 32:2, p. 135-161 |
| Index terms: | CAPITAL INVESTMENT INVESTMENT ANALYSIS FINANCING TAXATION |
| Language: | eng |
| Abstract: | Under existing tax codes in U.S. the effective tax rates on net operating income or losses are not the same. There is an absence of full loss offset. The negative tax, as a refund, may be postponed to later periods. The effects of the loss carry back and financing decisions of the firm are analyzed. The optimal strategies to eliminate, most if not all, potential corporate tax liabilities are demonstrated. It is also shown that the carry forward and carry back provisions provide more incentive for existing firms than for new firms to invest. At the macro level, these tax provisions encourage greater risk-taking by the more profitable firms. |
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