We consider an entrepreneur who has an option to invest in a project and a potential growth investment option. The two-stage investment costs are financed by bank loans guaranteed by an insurer in the first-stage investment and paid by the insurer in the second-stage investment. In return, the...

We consider an entrepreneur who has an option to invest in an irreversible but delayable project. If the project is sufficiently profitable, the firm has an option to make a growth investment, which makes the project cash flow increase by a constant factor. The entrepreneur has no money to...