I. The literature on investment in risky foreign projects, 213.—II. A portfolio model of foreign investment, 216.—III. The financing of foreign investment, 219.—IV. The effect of no foreign borrowing, 222.—V. The effect of taxation: debt transfer, 223.—VI. The effect of taxation: equity transfer, 226.—VII. Policy implications, 229.—VIII. The behavior of individual firms, 230.—IX. Conclusions, 230.

I. The basic model, 615.—II. Tax rate interdependence, 620.—III. Foreign borrowing, 626.—IV. Conclusion, 628.