Optimal Equity and Financing Model of Krouse and Lee: Corrections and Extensions

Suresh Sethi

Journal of Financial and Quantitative Analysis, 1978, vol. 13, issue 3, 487-505

Abstract: Krouse and Lee [5] have formulated an optimal financing problem of a firm in the dynamic setting of optimal control theory. Specifically, the problem is to find a financing mix of retained earnings and external equity over time in a way that maximizes the present value of the entire future dividends stream accruing to the firm's initial stockholders subject to a given maximum allowable growth rate for the firm.

Date: 1978
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