The Effects of Different Taxes on Risky and Risk‐free Investment and on the Cost of Capital

  • Author(s): YU ZHU, IRWIN FRIEND
  • Published: Apr 30, 2012
  • Pages: 53-66
  • DOI: 10.1111/j.1540-6261.1986.tb04491.x

ABSTRACT

This paper analyzes the major factors which determine the effects of taxation on the value of risky assets and on the cost of capital, and shows how the magnitudes and even the signs of these effects depend on the values assumed for a few key parameters in the model. Using plausible values for these parameters, it is shown that the results obtained are frequently counter‐intuitive.

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