uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …

. Besides output price uncertainty, the firm faces additional sources of risk which are aggregated into an additive background … risk. We show that the firm always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital …, irrespective of the risk attitude of the firm and the incidence of the multiple sources of uncertainty. Even though the …

uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm … always chooses its optimal debt-equity ratio to minimize the weighted average cost of capital, irrespective of the risk …. When the background risk is either additive or multiplicative, we provide reasonable restrictions on the firm's preferences …