| Summary: | 碩士 === 靜宜大學 === 企業管理學系 === 88 === The Role of Uncertainty in Investment
-The Case of Construction Industry
Abstract
Student:Tzu-huaa Chen
Advisor:C.C. Chang
Graduate Institute of Business Administration,
Providence University
The right investment decision depends on right capital budgeting. Especially, facing the total uncertainty in the future economic environment. Capital budgeting includes managerial strategy value keeping from undervaluating the real value of investment. Latterly, many scholars use the realoption valuing the project. So, we try to empirical the construction industry favor predictions of the option-based model from macro and micro view.
First from macro view, we use the square feet of constructions the measure of the level of new investment, the level of uncertainty is proxied by the variance of weekly rates of return of construction in Taipei stock market. We find evidence that the relationship between total uncertainty and new investment is statistically significant and inverse. The result favor predictions of the option-based model from macro view. Then from micro view, investment is reported speding on plant, property, and equipment. The level of uncertainty is proxied by the variance of weekly rates of return of the construction company in Taipei stock market. The result is investment and total uncertainty significant negative from micro view.
Lastly, we use a case explain the difference from option-based model and tranditional NPV. Valuing a delay option, making this case from NPV<0 to expand NPV>0. So the investment decision is accepting. Avoiding to lose a profit chance.
Keyword: Total uncertainty, Capital Budgeting,
realoption
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