Hostname: page-component-586b7cd67f-g8jcs Total loading time: 0 Render date: 2024-12-05T02:33:43.767Z Has data issue: false hasContentIssue false
  • English
  • Français

Abstract: Stochastic Demand and the Equity Capitalization Rate

Published online by Cambridge University Press:  19 October 2009

Mike Long  and
George Racette
Get access Rights & Permissions [Opens in a new window]

Extract

The purpose of our paper is to examine the impact of output and asset decisions on the pure equity capitalization rate of a monopolistic firm which faces a stochastic demand curve. Within the confines of a specific set of constraints we derive the following conclusions:

1) when assets are fixed and the task of the firm is to find the shareholder wealth-maximizing output, the capitalization rate is functionally related to the level of output, when Leland's Principle of Increasing Uncertainty (PIU) holds the optimal output will occur when the capitalization rate is increasing.

Type
IV. Financial Theory
Information
Journal of Financial and Quantitative Analysis , Volume 11 , Issue 4 , November 1976 , pp. 553
Copyright
Copyright © School of Business Administration, University of Washington 1976

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)