The paper introduces taxes on income and profit into a model of a stock market economy. The optimal choice of capital stock is then analyzed under assumptions that guarantee unanimous shareholders' preferences and a formula for the cost of capital is deduced. There then follows a discussion of...

This paper presents a general equilibrium analysis under uncertainty of the firm's optimal investment decision. The set up is a well developed two-period model of a stock market economy. A theorem provides necessary and sufficient conditions for shareholder unanimity and a general investment...

This paper analyzes the relation between stock market valuations of firms and the optimal choice of capital stock when markets are incomplete and firms act in the interests of a majority shareholders. No spanning assumptions are made. The standard unanimity results emerge as a special case when...