The Theory of Finance

analysis assumed assumption axioms beginning of period bonds capital structure cash flow Chapter choice commodity concave consumption function consumption-investment decision convex cost of capital criterion debt decision problem E(Rp earnings efficient portfolio equal Equation equivalent example expected return expected value Figure financing decisions firm's given implies income indifference curve individual assets interest rates investment decisions investors k₁ levered firm marginal market equilibrium market model market value rule maximize net present value normally distributed obtained one-period return operating decisions opportunity set optimal portfolio perfect capital market perfect market period 1 market portfolio return preference present value probability distribution problem random variable rate of interest rate of return risk aversion risk class riskless asset security holders shareholders shares slope standard deviation symmetric stable theory total market value two-parameter model two-period model unlevered firm utility function value at period variance Vi(t w₁