Tax Incentives for Small Businesses Exporting: A Capital Budgeting Decision Analysis

ACCOUNTING HORIZONS, Vol 10, No 2, June 1996

Posted: 16 Oct 1996

See all articles by Fred A. Jacobs

Fred A. Jacobs

Georgia State University - School of Accountancy

Ernest R. Larkins

Georgia State University - School of Accountancy

Abstract

Exporting is important to the health of the U.S. economy. Prior research indicates that the export potential is substantial in the small business sector. Through analysis of a base case scenario, this study presents the incremental net present value of cash flow from exporting through two tax entities specifically designed to encourage small businesses to export--the small foreign sales corporation (SFSC) and the interest-charge domestic international sales corporation (ICD). Then, the separate variables constituting the base case are allowed to vary to examine their sensitivity. In contrast to some studies, the results indicate that the SFSC results in a higher net present value of cash flow than the ICD across a broad range of variables. However, as the forecasted sales level increases and the hurdle rate gets very large, the ICD can become the optimal business form for exporting.

JEL Classification: G31, K34, F13

Suggested Citation

Jacobs, Fred A. and Larkins, Ernest R., Tax Incentives for Small Businesses Exporting: A Capital Budgeting Decision Analysis. ACCOUNTING HORIZONS, Vol 10, No 2, June 1996, Available at SSRN: https://ssrn.com/abstract=2772

Fred A. Jacobs

Georgia State University - School of Accountancy ( email )

P.O. Box 4050
Atlanta, GA 30302-4050
United States
404-651-4461 (Phone)
404-651-1033 (Fax)

Ernest R. Larkins (Contact Author)

Georgia State University - School of Accountancy ( email )

P.O. Box 4050
Atlanta, GA 30302-4050
United States
404-651-4469 (Phone)
404-651-1033 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
1,421
PlumX Metrics