Abstract
Within the modern theory of capital cost and capital structure by Brusov–Filatova–Orekhova (BFO theory) (Brusov and Filatova 2011; Brusov et al. 2011a, b, c, 2012a, b, 2013a, b, 2014a, b; Filatova et al. 2008; Brusova 2011) and modern investment models created within this theory, the influence of the growth of tax on profit rate on the efficiency of the investment is investigated. It has been shown that for long-term investment projects, as well as for arbitrary duration projects, the growth of tax on profit rate changes the nature of the NPV dependence on leverage at some value t*: there is a transition from the diminishing function NPV(L), when t < t*, to the growing function NPV(L). The t* value depends on the duration of the project, cost of capital (equity and debt) values, and other parameters of the project.
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Brusov, P., Filatova, T., Orekhova, N., Eskindarov, M. (2015). Is It Possible to Increase the Investment Efficiency by Increasing Tax on Profit Rate? An Abnormal Influence of the Growth of Tax on Profit Rate on the Efficiency of the Investment. In: Modern Corporate Finance, Investments and Taxation. Springer, Cham. https://doi.org/10.1007/978-3-319-14732-1_16
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DOI: https://doi.org/10.1007/978-3-319-14732-1_16
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