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Capital Investment under Uncertainty with Abandonment Options

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  • Bonini, Charles P.

Abstract

This paper is an analytic treatment of the abandonment decision in capital investment analysis. It provides a methodology which has application in obtaining better estimates for project value and risk.

Suggested Citation

  • Bonini, Charles P., 1977. "Capital Investment under Uncertainty with Abandonment Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(1), pages 39-54, March.
    • Handle: RePEc:cup:jfinqa:v:12:y:1977:i:01:p:39-54_02
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    Cited by:

    1. Adkins, Roger & Paxson, Dean, 2017. "Replacement decisions with multiple stochastic values and depreciation," European Journal of Operational Research, Elsevier, vol. 257(1), pages 174-184.
    2. Gomes Santana Félix, Elisabete & Esperança, José Paulo, 2004. "Efeito da flexibilidade na decisão de investimento: Uma aplicação à exploração do cobre [Flexibility effect on the investment decision: An application to the exploration of copper]," MPRA Paper 6185, University Library of Munich, Germany.
    3. Berger, Philip G. & Ofek, Eli & Swary, Itzhak, 1996. "Investor valuation of the abandonment option," Journal of Financial Economics, Elsevier, vol. 42(2), pages 257-287, October.
    4. Lander, Diane M. & Pinches, George E., 1998. "Challenges to the Practical Implementation of Modeling and Valuing Real Options," The Quarterly Review of Economics and Finance, Elsevier, vol. 38(3, Part 2), pages 537-567.
    5. Andrianos Tsekrekos, 2013. "Irreversible exit decisions under mean-reverting uncertainty," Journal of Economics, Springer, vol. 110(1), pages 5-23, September.
    6. Der‐Fa Chen & Peng‐Kwang Chen & Shao‐Hsi Chung & Kuo‐Chih Cheng & Chen‐Ho Wu, 2020. "The influence of performance feedback frequency and affective commitment on the sunk cost effect," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(5), pages 873-882, July.
    7. Sehilat Bolarinwa & Babatunde Yusuf & Khadijah Idowu & Jamiu Tijani, 2014. "Abandonment of Capital Investments and Survival of Small and Medium Enterprises: Evidence from Nigeria," Proceedings of Economics and Finance Conferences 0401626, International Institute of Social and Economic Sciences.
    8. Gomes Santana Félix, Elisabete, 2003. "Opções reais: tipologias e sua avaliação [Real options: typologies and its evaluation]," MPRA Paper 6186, University Library of Munich, Germany.

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