Optimal Investment and Exit Decisions under Financial Constraints

We study the interactibetweennancia1constraints and exit decisions of a ider uncerta1ntyWe consider a n1inear variational inequality associated with them s va1ue maximizing problemThe optimal po1icies are shown to existm the optima1ity conditions in the inequa The mode1dovo1oped herein can be so1ved exp1ioity when the oxit payoff of them is a rst order fti0f itsreplaoement costWe examine the properties of the exp1icit solution to exp1ain how the irreversible investment and the exit time are distorted by the binding fimncia1 constraintThe re1ationship between Tobin stheory ofinvestment and exit strategies oftheis diSCuSSed Key wordsIrreversib1e investmentExit Pena1ty method