Optimal Dynamic Investment Policies of a Value Maximizing Firm

ISBN-13: 9783540511526 / Angielski / Miękka / 1989 / 185 str.

Peter M. Kort

Opis

1.1. Scope of the Book This book is a contribution to the area of "dynamic models of the firm". The motivation for this kind of research is the following: Empirical studies (e.g. Albach (1976)) have shown that the development of the firm over time can be divided into different stages. such as growth. stationarity and contraction. In order to understand and evaluate these stages in a proper way. it is important to develop a suitable theoretical framework. To that end. economists have applied dynamic mathematical techniques. such as optimal control theory. calculus of variations and dynamic programming to design and analyse dynamic models of the firm. In this way. the economic theory of the firm is extended to a dynamic context. Within the field of the dynamics of the firm this book - develops a general investment decision rule. based on the concept "net present value of marginal investment". which is applicable in deterministic dynamic models of the firm; - studies the influence of adjustment costs of investment on optimal dynamic firm behavior; - extends the stochastic dynamic theory of the firm by connecting it with a dynamic version of the Capital Asset Pricing Model. Before elaborating on "the dynamics of the firm". we first review the subject of net present value in the classical analysis.

Spis treści

1. Introduction.- 1.1. Scope of the Book.- 1.2. The Net Present Value in the Theory of Corporate Finance.- 1.3. Review of Dynamic Models of the Firm.- 1.4. Outline of the Book.- 2. The Net Present Value in Dynamic Models of the Firm.- 2.1. Introduction.- 2.2. The Net Present Value in a Model with the Possibility of Debt Financing.- 2.2.1. Model Formulation and Optimal Solution.- 2.2.2. The Net Present Value and Further Economic Analysis.- 2.3. The Net Present Value in a Model with Activity Analysis.- 2.3.1. Model Formulation and Optimal Solution.- 2.3.2. The Net Present Value and Further Economic Analysis.- 2.4. The Net Present Value in a Model with Corporate and Personal Taxation.- 2.4.1. Model Formulation and Optimal Solution.- 2.4.2. The Net Present Value and Further Economic Analysis.- 2.5. The Net Present Value in a Model with a Growing Economic Environment.- 2.5.1. Model Formulation and Optimal Solution.- 2.5.2. The Net Present Value and Further Economic Analysis.- 2.6. Summary.- 3. The Net Present Value in Dynamic Adjustment Cost Models of the Firm.- 3.1. Introduction.- 3.2. The Theory of Adjustment Costs.- 3.3. A Dynamic Model of the Firm with a Financial Structure and a Convex Adjustment Cost Function.- 3.3.1. Model Formulation and Solution Concept.- 3.3.2. The Net Present Value and Further Economic Analysis.- 3.4. Dynamic Firm Behavior under a Concave Adjustment Cost Function.- 3.4.1. A Standard Optimal Control Model.- 3.4.2. Model Formulation and Solution when Applying Impulse Control.- 3.5. Summary.- 4. Dynamic Firm Behavior within an Uncertain Environment.- 4.1. Introduction.- 4.2. A Stochastic Dynamic Model of a Profit Maximizing Firm.- 4.3. A Stochastic Dynamic Model under the Assumption of Risk-Averse Investor Behavior.- 4.3.1. Model Formulation and Optimal Solution.- 4.3.2. The Model Extended with the Intertemporal Capital Asset Pricing Model.- 4.4. Summary.- 5. Conclusions.- Appendix 1. Solutions of The Models of Chapter 2.- A1.1. The Model with the Possibility of Debt Financing.- A1.1.1. The Optimal Trajectories.- A1.1.2. The Net Present Value Formulas.- A1.2. The Model with Activity Analysis.- A1.2.1. The Optimal Trajectories.- A1.2.2. A Comparison with the Results of Van Loon.- A1.2.3. The Net Present Value Formulas.- A1.3. The Model with Corporate and Personal Taxation.- A1.3.1. The Optimal Trajectory.- A1.3.2. A Comparison with the Results of Van Schijndel.- A1.3.3. The Net Present Value Formulas.- A1.4. The Model with a Growing Economic Environment.- A1.4.1. The Optimal Trajectory.- A1.4.2. The Net Present Value Formulas.- Appendix 2. Solutions of the Models of Chapter 3.- A2.1. The Model with a Financial Structure and a Convex Adjustment Cost Function.- A2.1.1. The Optimal Trajectories.- A2.1.2. The Net Present Value Formulas.- A2.1.3. Extension of the Planning Period.- A2.1.4. The Case of an Infinite Time Horizon.- A2.2. The Model with a Linear Adjustment Cost Function.- A2.3. The Model with Concave Adjustment Costs and Impulse Controls.- Appendix 3. The Additional Solutions and Mathematical Proofs of Chapter 4.- A3.1. The Model of a Profit Maximizing Firm.- A3.2. The Model under the Assumption of Risk-Averse Investor Behavior.- List of Symbols.- References.