Abstract:
This article discusses the effects of future output price uncertainty and wage rate
uncertainty on a firm’s investment decision by assuming the competitively riskneutral
whose purpose is to maximize the expected value of a number of cash flow
invested. Optimal investment properties based on the average investment growth
rate is affected by the uncertainty of output price and wage rates. Changes in
output prices have a positive effect on investment while wage rate changes have a
negative impact on the invested enterprise so that it can be said what the output
price changes tend to be accompanied by the change in the wage rate.
