Optimal Dynamic Investment Policy under Different Rates for Tax Depreciation and Economic Depreciation

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Abstract

This paper analyzes the consequences of incorporating a different rate for tax depreciation than for economic depreciation. Firms most often choose their tax depreciation rate in a strategic way. It would therefore be a coincidence if this optimization process leads to a tax depreciation rate that equals the economic depreciation rate. The implications of a difference between tax depreciation and economic depreciation are investigated in an optimal control model for the determination of the firm's optimal investment policy over time.
Original languageEnglish
Place of PublicationTilburg
PublisherAccounting
Number of pages30
Volume1999-59
Publication statusPublished - 1999

Publication series

NameCentER Discussion Paper
Volume1999-59

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