Strategic decisions that affect the long-run value of the firm. Some widely used tools of financial decision-making are shown to be correct only under restricted conditions. Further, other decision rules are found to be of substance only under conditions of uncertainty and/or in the presence of capital market imperfections. A frame-work is developed to show that direct and comprehensible approaches to financial policy problems exist with perfect capital markets under conditions of uncertainty, and, under some conditions, with capital market imperfections. Emphasis is placed on using theory to structure financial managers’ decision problems. PREREQUISITE
