The traditional literature on the CAPM assumes that investor's tax payments simply vanish from the model. This assumption is not at all consistent with the actual behavior of the Treasury. The theory of general equilibrium states that an interest rate rf = 0 will not affect prices if taxes are...

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...