Valuing Finite-Maturity Investment-Timing Options
AbstractThe investment-timing option (ITO) provides the ability to postpone rather than immediately implement or reject a capital budgeting process. It can significantly increase a project's value. A method for computing the value of an ITO for a postponable project with a finite maturing is presented. The effect of time until expiration on hurdle rates and the option to defer or reject the investment are also investigated.
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Bibliographic InfoArticle provided by Financial Management Association in its journal Financial Management.
Volume (Year): 26 (1997)
Issue (Month): 2 (Summer)
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- Giovanni Villani, 2008. "An R&D Investment Game under Uncertainty in Real Option Analysis," Computational Economics, Society for Computational Economics, vol. 32(1), pages 199-219, September.
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