IDEAS home Printed from https://ideas.repec.org/a/wsi/ijitdm/v09y2010i05ns0219622010004056.html
   My bibliography  Save this article

A Fuzzy Real Option Valuation Approach To Capital Budgeting Under Uncertainty Environment

Author

Listed:
  • SHIN-YUN WANG

    (Department of Finance, National Dong Hwa University, 1, Sec.2, Da-Hsueh Rd., Shou-Feng, Hualien 974, Taiwan)

  • CHENG-FEW LEE

    (Department of Finance and Economics, Rutgers University, 94 Rockafeller Road, Piscataway, NJ 08854, USA;
    Department of Banking and Finance, Kainan University, No. 1 Kainan Rd, Shinshing Tsuen, Luchu Shiang, Taoyuan 338, Taiwan)

Abstract

The information needed for capital budgeting is generally not known with certainty. The sources of uncertainty may be the net cash inflows, the life of the project, or the discount rate. We propose a capital budgeting model under uncertainty environment in which the concept of probability is employed in describing fuzzy events and cash flow information can be specified as a special type of fuzzy numbers. The present worth of each fuzzy project cash flow can be subsequently estimated. At the same time, to select fuzzy projects and determine the optimal decision time under limited capital budget, we offer an example to analyze the results of the capital budgeting problem under uncertainty using a fuzzy real option valuation.

Suggested Citation

  • Shin-Yun Wang & Cheng-Few Lee, 2010. "A Fuzzy Real Option Valuation Approach To Capital Budgeting Under Uncertainty Environment," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 9(05), pages 695-713.
  • Handle: RePEc:wsi:ijitdm:v:09:y:2010:i:05:n:s0219622010004056
    DOI: 10.1142/S0219622010004056
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219622010004056
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://libkey.io/10.1142/S0219622010004056?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chun-Hao Chen & Tzung-Pei Hong & Yeong-Chyi Lee & Vincent S. Tseng, 2015. "Finding Active Membership Functions for Genetic-Fuzzy Data Mining," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 14(06), pages 1215-1242, November.
    2. Yuhong Liu & I-Ming Jiang & Meng-I Tsai, 2019. "Influence of Managers’ Subjective Judgments on Project Abandonment Decision Making," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 18(02), pages 419-443, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijitdm:v:09:y:2010:i:05:n:s0219622010004056. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijitdm/ijitdm.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.