Valuation Of Industrial Giga-Investments: Theory And Practice
AbstractIndustrial giga-investments are long term irreversible very large, hundred million-class, industrial real investments that have a long building time. These investments are important to the companies undertaking them and to the economy as a whole. Giga-investments can sometimes even steer their markets. Giga-investments are different from financial and small real investments in many respects, but are often analysed and valued by using the same methods; this is most often not realistic and does not offer best possible decision support. In this paper we discuss and present industrial giga-investments. We discuss their special characteristics that require attention, when their profitability and value are analyzed. An industrial giga-investment case is presented and a numerical illustration of how industrial giga-investments can be valued with the pay-off method is presented.
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Bibliographic InfoArticle provided by International Association for Fuzzy-set Management and Economy (SIGEF) in its journal FUZZY ECONOMIC REVIEW.
Volume (Year): XVI (2011)
Issue (Month): 1 (May)
industrial giga-investments; industrial real investments; pay-off method; real option valuation;
Find related papers by JEL classification:
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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