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jsalvatier comments on Bias in capital project decision making - Less Wrong

40 Post author: jsalvatier 26 May 2011 06:06PM

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Comment author: jsalvatier 27 May 2011 01:41:23PM *  2 points [-]

Corporations are taxed on their profits (instead of their income) specifically to avoid discouraging investment in a perverse way.

Bankruptcy risk is certainly relevant, but its even more relevant for small businesses, which still have reasonable interest rates. If bankruptcy risk is what drives high MARRs that implies that a company that uses a 30% MARR has a ~20%/year default rate (30-10%) which is implausibly high.