Valuation of multi-stage BOT projects involving dedicated asset investments: a sequential compound option approach

Yu-Lin Huang and Chai-Chi Pi

Construction Management and Economics, 2009, vol. 27, issue 7, 653-666

Abstract: The valuation of multi-stage build-operate-transfer projects is not a trivial task. It needs to deal with uncertain project values in future expansions and the possibility of expansions or abandonment in the presence of project risks. The valuation problem becomes more difficult when multi-stage projects require upfront and intermediate dedicated asset investments for future expansions. Dedicated asset investments may or may not create project values, depending on whether future expansions could be justified and realized. A sequential compound option model is proposed to tackle these important valuation issues.

Keywords: Valuation; build-operate-transfer (search for similar items in EconPapers)
Date: 2009
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DOI: 10.1080/01446190903002789

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