Abstract
This paper explores the effects of tax asymmetries on the value of risky capital investments made by corporations.The government's claim on the firm is shown to be equivalent to a portfolio of options on the firm's revenues. The tax law's provisions for carrying tax losses forward and backward are introduced, necessitating a numerical solution for the value ofthe government's claim. The results show that asymmetric taxation of operating gains and losses can significantly affect the after-tax net present value of corporate investment opportunities.
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