A Valuation Model for Project Standby Capacity
This paper addresses the issue of project standby capacity optimization for capital budgeting. A detailed analysis and case study show that this is a particular real-option based situation, which solicits the use of statistical simulation. The method can be recommended as a useful heuristic for corporate capital budgeting, as well as for college-level class instruction.
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Volume (Year): 2009 (2009)
Issue (Month): 4 ()
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- Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
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- Barreto,Humberto & Howland,Frank, 2006. "Introductory Econometrics," Cambridge Books, Cambridge University Press, number 9780521843195, October.
- Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 707-727.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Terence C. Mills, 2006. "Introductory Econometrics: Using Monte Carlo Simulation with Microsoft Excel -super-®," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(6), pages 943-944, November.
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