Real options analysis of the Minami Alps forest road construction project: new valuation approach to social infrastructure project with sequential unit projects

Yoshifusa Kitabatake

Environmental Economics and Policy Studies, 2002, vol. 5, issue 4, 290 pages

Abstract: This article illustrates how the real options approach to public project evaluation is executed with a large-scale forest road construction project in one of the national park regions in Japan as a case study. Paying due attention to the existence of specified beneficiaries who want to make sure the allocated cost burden is warranted by prospective tangible economic benefits realized by the project’s execution, framing the real options application to public projects is made possible with the use of market-priced risk value in similar public projects. The article analyzes ex ante project evaluation models under both the existing legal framework and a new legal framework that allows the option to abandon the project totally or partially and clarifies how positive net present values of the Minami Alps forest road construction project depend on the cost-effectiveness parameter values of environmental damage mitigation activities and the degree of uncertainty embedded in the planned project. The article also executes sensitivity analysis to illustrate how the optimal domain of cost-effectiveness parameter values are affected by other parameters, such as the investment cost of unit project; and summarizes its contribution to the field of public project evaluation. Copyright Springer Japan 2002

Keywords: FILP (Fiscal Investment and Loan Program); Real options analysis; Minami Alps forest road; Public project evaluation; Norogawa forest road (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/BF03353925 (text/html)
Access to full text is restricted to subscribers.

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:spr:envpol:v:5:y:2002:i:4:p:261-290

Ordering information: This journal article can be ordered from
http://www.springer. ... mental/journal/10018

DOI: 10.1007/BF03353925

Access Statistics for this article

Environmental Economics and Policy Studies is currently edited by Ken-Ichi Akao

More articles in Environmental Economics and Policy Studies from Springer, Society for Environmental Economics and Policy Studies - SEEPS Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().