The paper represents a model for financial valuation of a firm which has control of the dividend payment stream and its risk as well as potential profit by choosing different business activities among those available to it. This model extends the classical Miller-Modigliani theory of firm valuation to the situation of controllable business activities in a stochastic environment. We associate the value of the company with the expected present value of the net dividend distributions (under the optimal policy). Copyright Blackwell Publishers 1999.