Revisiting uncertain investment and financing decisions using entry probability
Revisiting uncertain investment and financing decisions using entry probability
This paper extends the work of Chen and Chang (2010) and attempts to present a model for the optimal investment threshold and the real option value under price uncertainty from a different aspect of entry probability. I measure a financing policy by the debt ratio, a weight for the proportion of funding by debt relative to funding by equity. The weight is exogenously embedded in the stochastic optimization of an investment opportunity under price uncertainty. An entry probability, indicating the