  This paper examines the dividend and investment policies of a cash
constrained firm that has access to costly external funding. We depart from the
literature by allowing the firm to issue collateralized debt to increase its
investment in productive assets resulting in a performance sensitive interest
rate on debt. We formulate this problem as a bi-dimensional singular control
problem and use both a viscosity solution approch and a verification technique
to get qualitative properties of the value function. We further solve
quasi-explicitly the control problem in two special cases.
