Capital Budgeting Under Uncertainty: The Issue of Optimal Timing

Chi-Wen Jevons Lee and Christopher R. Petruzzi

Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research

Abstract: In a capital budgeting decision, timing is often an important part of the decision-maker’s opportunity set. The ability of the manager to choose when to undertake an investment has similarities to the ability of the holder of a securities option to choose when to exercise that option. This paper uses formulas developed for the valuation of securities options to evaluate the timing option and to derive decision rules for optimal investment timing. The paper provides examples of application in the cases of plant and equipment replacement, marketing of new products, and real estate development.

References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fth:pennfi:2-84

Access Statistics for this paper

More papers in Rodney L. White Center for Financial Research Working Papers from Wharton School Rodney L. White Center for Financial Research Contact information at EDIRC.
Bibliographic data for series maintained by Thomas Krichel ().