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The Differential Impact of Taxes on Investment Decisions of New and Established Businesses

The Differential Impact of Taxes on Investment Decisions of New and Established Businesses This paper demonstrates that certain provisions of the tax code may have a differential impact on the investment decisions of new and established firms. Using net present value as the investment criterion, it is shown that under conditions of certainty a project may have different net present values for new and established firms. Under conditions of uncertainty the differences in project net present values may be even more pronounced. It is also demonstrated that, contrary to the conventional wisdom, it may be advantageous for certain firms to use straightline depreciation rather than accelerated depreciation for tax purposes. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Journal of Small Business SAGE

The Differential Impact of Taxes on Investment Decisions of New and Established Businesses

American Journal of Small Business , Volume 3 (3): 9 – Jan 1, 1979

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Publisher
SAGE
Copyright
© 1979 SAGE Publications
ISSN
0363-9428
eISSN
1540-6520
DOI
10.1177/104225877900300304
Publisher site
See Article on Publisher Site

Abstract

This paper demonstrates that certain provisions of the tax code may have a differential impact on the investment decisions of new and established firms. Using net present value as the investment criterion, it is shown that under conditions of certainty a project may have different net present values for new and established firms. Under conditions of uncertainty the differences in project net present values may be even more pronounced. It is also demonstrated that, contrary to the conventional wisdom, it may be advantageous for certain firms to use straightline depreciation rather than accelerated depreciation for tax purposes.

Journal

American Journal of Small BusinessSAGE

Published: Jan 1, 1979

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