This study analytically specifies the residual cash flow stream that real capital embodies. The specification separates debt cash flows from equity and obtains an equilibrium condition equating marginal physical product and real user cost of capital. Analysis of the user cost specification...

This study presents a specification for the neoclassical user cost of capital that reflects dynamic processes for debt maturity structure and for pretax cash flows. Equivalencing levered and unlevered user costs reveals tradeoffs between equilibrium financing rates and underlying processes that...

This study weds the user cost of capital with average period in a modern analytical relationship and offers three implications. One, a real capital stock's fundamental value as a proportion of its current replacement cost depends on a ratio of average periods. Two, the effect on fundamental...