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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]

Author

Listed:
  • Gomes Santana Félix, Elisabete
  • Esperança, José Paulo

Abstract

This research evidences the value of flexibility on the investment decision, in the exploration sector of copper, face to the existence of an abandonment option. The results of three evaluation models are compared: the Net Present Value; the Binomial and a Suitable Binomial to the exploration sector of copper. Monthly quotations of copper of the LME had been used; values for the Producers Price Index; e values of OT-September with maturity nearest to the time horizon of the investment. To the similarity of other applications of the real options, we confirm that, in uncertainty context, the traditional method significantly understates the return of the investment decisions.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:6185
    as

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    File URL: https://mpra.ub.uni-muenchen.de/6185/1/MPRA_paper_6185.pdf
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    References listed on IDEAS

    as
    1. Moyen, Nathalie & Slade, Margaret & Uppal, Raman, 1996. "Valuing risk and flexibility : A comparison of methods," Resources Policy, Elsevier, vol. 22(1-2), pages 63-74.
    2. Bonini, Charles P., 1977. "Capital Investment under Uncertainty with Abandonment Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(01), pages 39-54, March.
    3. 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.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Flexibilidade na Decisão de Investimento; Opções Reais; Sector de Exploração do Cobre; Exploração de Recursos Naturais; Métodos de Avaliação de Investimentos;

    JEL classification:

    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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