Leverage, uncertainty and investment decisions

Main author: Kenc, Turalay
Other authors: Driver, Ciaran
Format: Journal Article           
Online access: Click here to view record


Summary: We explore the role of taxes on stimulating investment decisions for levered firms under cash flows 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.