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Inflation, Uncertainty, and Investment

Inflation, Uncertainty, and Investment ABSTRACT This paper investigates the effect of inflation on a firm's investments in fixed assets. When future prices are certain, inflation affects the present value of depreciation tax shields, and the impact of inflation on the choice between different lived assets is nonmonotonic. Future asset price uncertainty creates a valuable switching option and benefits shorter‐lived assets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Inflation, Uncertainty, and Investment

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References (20)

Publisher
Wiley
Copyright
1986 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1986.tb04528.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper investigates the effect of inflation on a firm's investments in fixed assets. When future prices are certain, inflation affects the present value of depreciation tax shields, and the impact of inflation on the choice between different lived assets is nonmonotonic. Future asset price uncertainty creates a valuable switching option and benefits shorter‐lived assets.

Journal

The Journal of FinanceWiley

Published: Jul 1, 1986

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