, in particular, long-term debt. An active, though not necessarily large, stock market and a large banking sector are also …

firms balance the tax advantages of borrowing against the costs of financial distress; (3) agency theories, in which …

We show how to calculate the after-tax value of real options, including the value of interest tax shields on debt … supported or displaced by the options. An option's “debt capacity” can be calculated from the adjusted present value (APV) and … target debt ratio for the underlying asset, the option delta, and the amount of risk-free borrowing or lending that would be …

rents and payout. They do not exploit interest tax shields fully. The interactions of investment, debt and payout decisions … can change drastically depending on managers' preferences. Managers with power utility set investment, debt and payout … proportional to the firm's net worth, generating a constant (possibly negative) net debt ratio. With exponential utility …

value (APV). The risk-free rate of interest must be after-tax. Debt capacity depends on the APV and target debt ratio for …We show how the value of a real option depends on corporate income taxes and the option's “debt capacity,” defined as … the amount of debt supported or displaced by the option. The value of the underlying asset must be an adjusted present …

financing. The basic pecking order model, which predicts external debt financing driven by the internal financial deficit, has … much greater explanatory power than a static trade-off model which predicts that each firm adjusts toward an optimal debt … empirical evidence supports the notion of an optimal debt ratio. …

viewed as increasing debt capacity, other things being equal. This paper focusses on the dark side of liquidity: greater … asset liquidity on debt capacity. It suggests an alternative theory of financial intermediation and disintermediation. …