Corporate Investment Policy

摘要: This chapter is concerned with the classical applied problem of capital allocation by a corporation whose securities are traded in competitive and frictionless markets. Under reasonable assumptions that discussed, this amounts to choosing projects market value exceeds their cost, so becomes one valuing uncertain future cash flows. Valuation discounting at risk-adjusted discount rate shown be admissible under certain assumptions, practical problems estimating risk premia discussed. More general valuation approaches introduced rubric certainty equivalent pricing, which based on martingale pricing theory Harrison Pliska (1981), allows, for example, stochastic interest rates premia. leads naturally discussion real options role competition strategic considerations investment policy.