While firm growth critically depends on financing ability and access to external capital, few papers in the literature have considered the effects of financial constraints on firms' investment decisions. Without considering the effects of managerial flexibility and resource constraints, traditional finance theory cannot be used to price the value of a company since company's operating decisions play an important role in determining the risk of the cash flows. Considering the effects of demand uncertainty and market imperfections, we analyze the interactions between investment and financing decisions, develop optimization based valuation framework to calculation the value of the company, and make operational and capital structure decisions simultaneously.; Our models first illustrate that a firm's investment decisions are affected by the existence of financial constraints, despite the Modigliani and Miller propositions which demonstrate that a firm's investment and financing decisions can be made independently in a perfect capital market. We analyze the interactions between a firm's production and financing decisions as a tradeoff between the tax benefits and financial distress costs of debt.; We also explore the relationship between operating conditions and financial leverage and observe that financial leverage can increase as profit margins reach either low or high extremes. We also provide some empirical support for this observation. We extend our model to consider the effects of agency costs on the firm's production decision and debt choice by including performance-based bonuses in the manager's compensation. Our analyses show how managerial incentives may drive a manager to deviate from firm-optimal decisions and that low-margin producers face significant risk from this agency cost while high-margin producers face relatively low risk from using such compensation.; This research further proposes an integrated corporate planning model, which extends the forecasting-based discount dividend pricing method into an optimization-based valuation framework to make production and financial decisions simultaneously for a firm facing market uncertainty. We also develop an efficient algorithm to solve the integer stochastic programming model with nonlinear constraints. Compared with the traditional valuation and planning models, our method yields higher equity valuations, indicating that valuation without considering contingent decisions is inherently inaccurate.
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