We characterize the optimal investment decision and the stock value of an unlevered firm that holds the non-standard option of improving the growth rate of cashflows from its assets in place upon incurring an irreversible cost. The firm's investment policy and equity price are studied as a function of the market price of risk, of cashflow's exposure to systematic risk, and of cashflow volatility.
Risk Adjustment, Investment Policy, And Valuationfor an Unlevered Firm
GIANFREDA, Angelica;
2008-01-01
Abstract
We characterize the optimal investment decision and the stock value of an unlevered firm that holds the non-standard option of improving the growth rate of cashflows from its assets in place upon incurring an irreversible cost. The firm's investment policy and equity price are studied as a function of the market price of risk, of cashflow's exposure to systematic risk, and of cashflow volatility.File in questo prodotto:
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