This paper develops a model of a firm's foreign investment decisions and characterizes its optimal investment and repatriation strategies. It then derives the theoretical relation between firm value and the book value of the deferred tax liability associated with such investments or, if no liability is recognized for financial reporting purposes, the reduction in firm value associated with permanently reinvested foreign earnings. It shows that the valuation relevance of these items depends on whether the earnings are invested in operating assets or financial assets. It also shows the effects of a temporary tax holiday on firm value.