Leverage, uncertainty and investment decisions
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We explore the role of taxes on stimulating investment decisions for levered firms under cashflows and investment costs uncertainty using the adjusted present value-based real options approach developed by Myers and Read (2019). We extend their work to consider combined tax credits and uncertain investment costs. We then run a numerical analysis to quantify the impact of uncertainty, corporate tax and investment tax credit in stimulating investments.
Irreversible investment , Tax incentives , Uncertainty , Leverage
Kenc, T., & Driver, C. (2020). Leverage, uncertainty and investment decisions. Economic Letters, 190. Article 109052. https://doi.org/10.1016/j.econlet.2020.109052