Investment, capital stock, and replacement cost of assets when economic depreciation is non-geometric

This paper extends the Q-theory of investment to capital goods with arbitrary efficiency profiles. When is non-geometric, firm’s stock and replacement cost its assets are fundamentally different aggregates history. If have constant over a finite useful life, simple proxies readily available for both in place stock. Under this assumption, we decompose total rate along two dimensions: into net components, cash non-cash components. We show these components exhibit significantly economic determinants behavior.