Real Options In Capital Investment / Edition 1

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Overview

This compilation integrates various new contributions to the growing real options literature. Recent developments in the valuation of capital investment opportunities seen as real options (e.g. to defer, expand, abandon, or switch) have provided the tools and unlocked the possibilities to revolutionize the field of capital budgeting. The resulting insights, strategies, and techniques enable quantifying the thus far elusive elements of managerial operating flexibility and strategic interactions. These are vital to successfully capitalize on favorable future investment opportunities or limit losses from adverse market developments. This book presents various models and operating strategies, and a variety of applications ranging from acquisitions and divestitures, to natural resource development and pollution compliance. It is intended for both the academic and the professional market.

The book's contributions are divided into five parts, covering sections on real options and alternative valuation paradigms for capital investment analysis; on the analysis of general exchange or switching options, and interdependencies among multiple such options; on strategic acquisitions, infrastructure, and foreign investment options; on mean reversion/ alternative formulations in natural resource investments, shipping, and start-up ventures; and on other applications in pollution compliance, land development, flexible manufacturing, and financial default options. Both academic and practitioner interest in these developments is unusually high. The book can serve as supplementary material for the academic market, e.g., in advanced finance courses in option pricing or capital budgeting, in doctoral seminars, and as a library resource. It may also be of interest to the professional market (e.g. corporate planners and finance executives in the oil, pharmaceutical, auto and a variety of other industries), academics from related areas (e.g. decision analysts or economists), as well as to international readers (academics, doctoral students, and professionals).

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Product Details

  • ISBN-13: 9780275946166
  • Publisher: ABC-CLIO, Incorporated
  • Publication date: 9/5/2000
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 382
  • Lexile: 1580L (what's this?)
  • Product dimensions: 6.00 (w) x 9.00 (h) x 1.00 (d)

Meet the Author

LENOS TRIGEORGIS is currently Associate Professor of Finance at the University of Cyprus.

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Table of Contents

Tables and Figures
Preface
1 Real Options: An Overview 1
2 Methods for Evaluating Capital Investment Decisions under Uncertainty 31
3 Merging Finance Theory and Decision Analysis 47
4 The Strategic Capital Budgeting Process: A Review of Theories and Practice 69
5 The Value of Flexibility: A General Model of Real Options 89
6 The Valuation of American Exchange Options with Application to Real Options 109
7 Operating Flexibilities in Capital Budgeting: Substitutability and Complementarity in Real Options 121
8 The Value of Options in Strategic Acquisitions 135
9 Corporate Governance, Long-term Investment Orientation, and Real Options in Japan 151
10 Volatile Exchange Rates and the Multinational Firm: Entry, Exit, and Capacity Options 163
11 The Effects of Reversion on Commodity Projects of Different Length 185
12 Contingent Claims Evaluation of Mean-Reverting Cash Flows in Shipping 207
13 Valuing Start-up Venture Growth Options 221
14 Investment in Pollution Compliance Options: The Case of Georgia Power 243
15 Optimal Land Development 265
16 Multiproduct Manufacturing with Stochastic Input Prices and Output Yield Uncertainty 281
17 Default Risk in the Contingent Claims Model of Debt 303
Bibliography 323
Author Index 347
Subject Index 351
About the Editor and Contributors 357
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