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Cash Flow Immediacy and the Value of Investment Timing


  • Glenn W. Boyle
  • Graeme A. Guthrie


In a model with stochastic interest rates, irreversible investment, and two investment dates, the value of investment delay has two components: the expected gain from committing now to investment at a future date and the potential gain from the ability to reverse this commitment. Holding net present value constant, we show that the values of both these components are increasing in the proportion of project cash flows that accrue in the more distant future. Our results emphasize the importance of the interaction between cash flow immediacy and interest rate uncertainty for the optimal investment policy.

Suggested Citation

  • Glenn W. Boyle & Graeme A. Guthrie, 2003. "Cash Flow Immediacy and the Value of Investment Timing," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 26(4), pages 553-570, December.
  • Handle: RePEc:bla:jfnres:v:26:y:2003:i:4:p:553-570
    DOI: 10.1111/1475-6803.00074

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    Cited by:

    1. Glenn Boyle & Graeme Guthrie, 2006. "Payback without apology," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(1), pages 1-10, March.

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