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Traditional models of capital budgeting including taxes are based on deterministic tax rates and tax bases. In reality, however, there are multiple sources of tax uncertainty. Tax reforms induce frequent changes in both tax rates and tax bases, making future taxation of investments a stochastic...
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This paper deals with the effects of tax rate uncertaity on risk-neutral and risk-averse investment behavior. We … analyse effects of stochastic tax rates on both real and financial investment. It emerges that under risk neutrality as well … as under risk aversion, increased tax rate uncertainty has an ambiguous impact on investment behavior, depending on the …
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