How Do Recent Changes in Tax Laws Affect Investment Decisions

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How Do Recent Changes in Tax Laws Affect Investment Decisions
Myles M Dryden
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Tneoreticaliy it is true that projects . are marginal (cost -of -capital equals i) without the benefit of the investment credit will be accepted if the credit is applied » since s is a3. Ways greater than i. It does not seem likely that projects not acceptable (by coraparing li Ibid c J p. <^5 "in the important 10-15 year zone ths return is raised fro, ;; „. Percent to an average of around 11, ij percent. In other words 5 the return itself goes up by l^f percent, " 12 Ibid. 3 p. U-. ■■— "'*'—^-"- - 10 - i with the cost-of-capital) would in practice becorae acceptable as a result of comparing s with the cost~of- capital, especially if the uncertainties in both s and the cost-of-capital are considesned. In brief the investment credit, in so far as it affects rate-of-retum computations, does not seeta to be particularly influential. It is interesting to consider whether these conclusions are at all sensitive to the assumptiranis made by Terborgh. The restricticns on the time shape of the earnings stream, R

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