Optimal Dynamic Investment Policies of a Value Maximizing Firm

Optimal Dynamic Investment Policies of a Value Maximizing Firm

by Peter M. Kort
     
 

This book is a contribution to the area of dynamic models of the firm. In Chapter 1, a general investment decision rule based on the concept of net present value of marginal investment is developed. In chapter 2, the rule is applied in deterministic dynamic models of the firm. This rule can be expressed as follows: If the net present value of marginal

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Overview

This book is a contribution to the area of dynamic models of the firm. In Chapter 1, a general investment decision rule based on the concept of net present value of marginal investment is developed. In chapter 2, the rule is applied in deterministic dynamic models of the firm. This rule can be expressed as follows: If the net present value of marginal investment is positive, it is optimal for the firm to grow as fast as possible; If the net present value of marginal investment is zero, the firm is in its optimal situation and it determines its investment policy to maintain this position; If the net present value of marginal investment is negative, it is optimal for the firm to contract as much as possible. In Chapter 3, the influence of adjustment costs of investment on optimal dynamic firm behaviour is studied. To that end, models with convex and concave adjustment cost functions are developed and analysed by using the investment decision rule described above. In Chapter 4, the shastic dynamic theory of the firm is extended by connecting it with the Intertemporal Capital Asset Pricing Model (ICAPM) developed by Merton.

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Product Details

ISBN-13:
9783540511526
Publisher:
Springer Berlin Heidelberg
Publication date:
06/12/1989
Series:
Lecture Notes in Economics and Mathematical Systems Series, #330
Edition description:
Softcover reprint of the original 1st ed. 1989
Pages:
185
Product dimensions:
6.69(w) x 9.61(h) x 0.42(d)

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