Risk adjustment, investment policy, and valuation for an unlevered firm
AbstractWe 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.
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Bibliographic InfoPaper provided by University of Verona, Department of Economics in its series Working Papers with number 49.
Date of creation: Oct 2008
Date of revision:
Investment; Equity pricing; Market price of risk.;
Find related papers by JEL classification:
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-10-28 (All new papers)
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