VALUATION OF INDUSTRIAL GIGA-INVESTMENTS: THEORY AND PRACTICE

Mikael Collan

Fuzzy Economic Review, 2011, vol. XVI, issue 1, 21-37

Abstract: Industrial giga-investments are long term irreversible very large, hundred million-class, industrial real investments that have a long building time. These investments are important to the companies undertaking them and to the economy as a whole. Giga-investments can sometimes even steer their markets. Giga-investments are different from financial and small real investments in many respects, but are often analysed and valued by using the same methods; this is most often not realistic and does not offer best possible decision support. In this paper we discuss and present industrial giga-investments. We discuss their special characteristics that require attention, when their profitability and value are analyzed. An industrial giga-investment case is presented and a numerical illustration of how industrial giga-investments can be valued with the pay-off method is presented.

Keywords: industrial giga-investments; industrial real investments; pay-off method; real option valuation (search for similar items in EconPapers)
JEL-codes: D81 G31 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:fzy:fuzeco:v:xvi:y:2011:i:1:p:21-37

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