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and Lee, C. (2003). “Capital budgeting in a situation with variable utilization of capacity – an example from the pulp industry.” Working Paper. “The Origin and Evolution of New Business.” England: Oxford University Press. Compound real options valuation of renewable energy projects: The case of a wind farm in Serbia. (1973) “An intertemporal capital asset pricing model.”, Myers, S.C. (1977). “Computation of the multivariate normal integral.”, Duan, C., Lin, W.T. The final binomial tree results show that the proposed sequence of options increases project value by transforming higher risk and lower return in the initial discounted cash flow model, to lower risk and higher return in the RO model. Part of Springer Nature. startxref
Cox, J.C. and Ross, S.A. (1976). Black, F. and Scholes, M. (1973). “Case studies on real options.”, Korobov, N.M. (1957). By continuing you agree to the use of cookies. Bhide, A.V. 69 0 obj <>
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We compared computing speeds and errors of three numerical integration methods. Compound Real Options with the Pay-off Method: a Three-Stage R&D Case Illustration Compound real options are combinations of real options, where an exercise of a real option opens another real option. 0000000949 00000 n
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(2002). https://doi.org/10.1016/j.rser.2016.11.001. This is a preview of subscription content, Amram, M.H. Copyright © 2020 Elsevier B.V. or its licensors or contributors. Trigeorgis, L. and Mason, S.P. This paper examines the real options valuation of a potential onshore wind farm project in Serbia. “An analytic valuation formula for unprotected American call options on stocks with known dividends.”, Sims, Christopher A. In empirical study, we evaluate the initial public offering (IPO) price of a new DRAM chipmaker in Taiwan. We estimate the dividend-like yield with two methods, and find the yield to be negative. This paper contributes to the existing literature in at least two ways: it presents in-depth analysis of the real option application to the RES-E project and provides decision-makers with sophisticated tool for improving strategic thinking, capital budgeting and decision-making processes. 0000001078 00000 n
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(1978). “Valuing managerial flexibility.”, Zaremba, S.K. (1987). “Sequential capital budgeting as real options: the case of a new dram chipmaker in Taiwan.”, Genz, A. Brent, R.P. “Real options: managerial flexibility and strategy in resource allocation.” Cambridge, MA: MIT Press. and Sinquefield, R.A. (1999). (1987). “The nature of option interactions and the valuation of investment with multiple real options.”, Trigeorgis, L. (1993b). “Zur angenäherten berechnung mehrfacher integrale.”. “Time to build, option value, and investment decisions.”, McDonald, R. and Siegel, D. (1984). 81 0 obj<>stream
x�b```f``�a`a``f`@ V da�(����w;���f�����/20����Z R�,ȗ� IiRk���������j� These methods, combined with appropriate root-finding method, were run by computer programs Fortran and Matlab. In empirical study, we evaluate the initial public offering (IPO) price of a new DRAM chipmaker in Taiwan. Andersson, H. (1999). ), Drezner, Z. Monte Carlo method had the slowest execution speed. <<465A22B30A48F1409107ED394B5E1623>]>>
In addition, most renewable energy electricity generation (RES-E) projects are characterized by considerable uncertainty and sequential decision-making. The negative dividend-like yield results from the negative correlation between the newly constructed DRAM foundry and its twin security, implying the diversification advantage of a new generation of DRAM foundry with a relative low cost of investment opportunity. All the aforementioned options and paths are illustrated in the multiphased sequential compound (nested) mutually exclusive path dependent real options strategy decision tree for the wind farm project in Fig. 0000004162 00000 n
It is also found that the value of real option is in reverse relation with interest rate and not necessarily positively correlated with volatility, a result different from that anticipated under the financial option theory.