Abstract: This paper analyzes interaction relationships of investment and financing decisions on the view of tax benefit and bankrupt cost by the mean of real options.It discloses some kind of coordination relationships of investment and financing decisions,which would be different under the conflicts of equity-holders and debt-holders because of overinvestment resulting from ove-rchasing of tax benefit of equity-holders and the consequent high debt financing cost,which means non-efficient financing decisions,caused by non-efficient investment decisions.Nevert heless,overinvestment under debtagency conflicts would be abated by tax substitution of depreciation and thus relieves non-efficient decisions of financing decisions.

Key words: tax benefit, bankruptcy cost, investment decision, financing decision, interactions