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Capital Budgeting: a Tax Shields’ “Mirage”?

Author

Listed:
  • Victor DRAGOTĂ

    (Bucharest Academy of Economic Studies)

  • Lucian ŢÂŢU

    (Bucharest Academy of Economic Studies)

Abstract

The mainstream in Finance studies recognizes the impact of tax shields on capital budgeting. This study offers some evidences regarding a bias in direct investment projects valuation in the case of taking into account of the allowance of recovery of the losses recorded in the past financial exercises from future profits as long as the classical indicators (e.g., Net Present Value) are used. Also, this tax regime seems to favour the adoption of less-performer projects by lessperformer companies, as long as these projects should be otherwise rejected by a performer company.

Suggested Citation

  • Victor DRAGOTĂ & Lucian ŢÂŢU, 2011. "Capital Budgeting: a Tax Shields’ “Mirage”?," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(3(556)), pages 31-40, March.
    • Handle: RePEc:agr:journl:v:3(556):y:2011:i:3(556):p:31-40
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