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Capital investment under uncertainty: calculating the present value of the depreciation tax shield when the tax rate is stochastic.: An article from: Engineering Economist Best

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Capital investment under uncertainty: calculating the present value of the depreciation tax shield when the tax rate is stochastic.: An article from: Engineering Economist Overview

This digital document is an article from Engineering Economist, published by Institute of Industrial Engineers, Inc. (IIE) on March 22, 1996. The length of the article is 3235 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

From the author: The assumption of a positive marginal tax rate in each period over the life of an investment project does not properly characterize the tax position of a significant number of firms. The paper develops a lower bound on the present value of the tax shield from declining balance depreciation given a reasonable assumption about the stochastic nature of the period by period marginal tax rate. It turns out that the standard textbook formula is a reasonably good approximation of the true present value of the tax shield since our lower bound is very close to the textbook formula.

Citation Details
Title: Capital investment under uncertainty: calculating the present value of the depreciation tax shield when the tax rate is stochastic.
Author: W.J. Hurley
Publication:Engineering Economist (Refereed)
Date: March 22, 1996
Publisher: Institute of Industrial Engineers, Inc. (IIE)
Volume: v41 Issue: n3 Page: p243(9)

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