search query: @author Amoako-Adu, B. / total: 6
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| Author: | Amoako-Adu, B. Rashid, M. |
| Title: | Corporate tax cut and capital budgeting. |
| Journal: | Engineering Economist
1990 : WINTER, VOL. 35:2, p. 115-128 |
| Index terms: | CAPITAL INVESTMENT CAPITAL BUDGETING CORPORATION TAX |
| Language: | eng |
| Abstract: | Corporate tax reduction is used as a fiscal tool to stimulate investment in depriceable assets. But such a tax cut has several direct and indirect effects on business investment which do not run in the same direction. There is a "cash flow effect" which increases the profitability of projects, and a "discount rate effect" which reduces the profitability of capital investments. Ignoring the macroeconomic effects of a corporate tax cut and their feedback effect on business investment, the interaction of these two opposing forces renders the net effect theoretically indeterminate. However, a numerical example shows that for reasonable parameters, the net effect of a tax cut on capital investments may be positive. |
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