A FUZZY BINOMIAL APPROACH TO VALUATE THE REAL OPTIONS OF INVESTMENT PROJECTS

• Main Authors: Shiu-Hwei Ho, 何旭輝
• Other Authors: 廖述賢
• Format: Others
• Language: en_US
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/04491760307955094573

博士 === 淡江大學 === 管理科學研究所博士班 === 99 === The typical approaches to investment project evaluation are based on discounted cash flows (DCF) analysis which provides measures like net present value (NPV) and internal rate of return (IRR). DCF-based approaches exhibit two major pitfalls. One is that DCF parameters such as cash flows cannot be estimated precisely in an uncertain decision making environment. The other one is that the values of managerial flexibilities in investment projects cannot be exactly revealed through DCF analysis. Both of them would have significant influence on strategic investment projects evaluation. This dissertation proposes a fuzzy binomial approach that can be used in project evaluation under uncertainty. The proposed approach also reveals the value of flexibilities embedded in the project. Furthermore, this dissertation provides a method to compute the mean value of a project’s fuzzy NPV. The project’s fuzzy NPV is characterized with right-skewed possibilistic distribution because these flexibilities retain the upside potential of profit but limit the downside risk of loss. Finally, this dissertation discusses the value of multiple options in a project.