It is crucial to consider how profits vary over the life cycle of the firm in order to understand why the aggregate profit share has been increasing while firm entry has been declining. All else equal, the more back-loaded profits are, the lower is the value of the firm due to discounting....

Capital costs are not directly observed since most firms own part of their capital stock. I show how cross-sectional variation in firms' input choices reveals the user cost of capital. Estimating the model using Compustat data, I find that capital costs as a share of output have been declining....