Real option valuation in investment projects

Oktay Taş and Hüseyin Yiğit Ersen

Journal of Applied Finance & Banking, 2012, vol. 2, issue 5, 11

Abstract: Several new models are used to eliminate lack of classic methods in valuation of investment decisions. Finding an answer for the question “which method is used to value investment†is important for investor to decide right investment. Choice of both methods and the components that are used in these methods are important in valuation of investments. Real options, one of the current methods in project valuation, provide several advantages for investors which apart from classic approximations: Real options give options like postponement, enlargement, growth, abandonment to the investor in decision process, so it creates opportunity that provide more careful valuation. In this study, real option method is used to value real investment project. Furthermore, AHP method is utilized to determine elements that are used in project valuation process. Whereas the investment decision implementation that is made in solar energy sector cannot be carried out with classical approximations, a project case that is valued with real option valuation method can be argued.

Date: 2012
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