Question: A law passed in 2009 allowed homebuilders to offset their losses incurred in the weak housing markets of 2008 and 2009 against profits the companies

A law passed in 2009 allowed homebuilders to offset their losses incurred in the weak housing markets of 2008 and 2009 against profits the companies booked as far back as 2004 (when the housing sector was booming). Prior to this law, businesses could use losses to offset just the two previous years of profits [Morgenson, 2009]. Explain how this law would affect corporate investment by homebuilders, using the models of corporate investment decision making discussed in this chapter.

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