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Corporate financing and investment decisions when firms have information that investors do not have

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Academic year: 2021

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Fig.  1:  The  issue-investment  decision when managers know more  than investors  about  the  value  of  the  firm's assets  in place  (a) and  the  net  present  value  of  its  investment  opportunities  (b).
Fig.  2:  Solution  for  Example  2 from Section 2.  In  this  case,  the  firm issues  and  invests  in  state  1, when assets  in place  are  worth 50  and  the  net  present value  of  the  investment  opportunity  is 10--i.e.,  where  (a,b)=(50,10)

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