We show economic depreciation decreases value maximizing investment hurdle rates and encourages both maintenance and growth. Economic depreciation without maintenance decreases the upside potential of future growth opportunities upon stochastically improved profitability. Managers forestall this...

We investigate the economics of real estate investment when maintenance of a property enhances neighborhood value. Because a property owner does not recognize this positive externality for his/her neighbor, he/she under-maintains. Smaller properties benefit most from this externality. We show...

We show that the value maximizing hurdle rate for research and development (R&D) investments among private firms operating in a market setting is less than for conventional investments despite the fact that R&D has development risk. Because development risk arises only during R&D, entrepreneurs...

A key requirement for the start of many entrepreneurial businesses is private equity or venture capital financing. In the traditional approach to entrepreneurial investment analysis, an entrepreneur starts a new venture, and a venture capitalist finances the new venture, when business return...

We derive the financial market return implications of a number of models of an insurer faced with different regulatory regimes and differing access to financial markets for added capital. If insurers have unhindered access to financial markets and insurance regulation requires an immediate...

We derive the optimal economic ruin boundary for an insurer when regulation requires an immediate capital contribution to offset a capital deficit. This boundary establishes the financial conditions under which shareholders no longer add capital to a distressed insurer. We describe this event as...

The product differentiation hypothesis for trade credit says that business managers use trade credit like advertising to differentiate their products. Prior studies of this hypothesis conclude that higher profit margins induce firms to increase trade credit and vice versa. We better represent...