Journal of Korean Institute of Industrial Engineers (대한산업공학회지)

Korean Institute of Industrial Engineers (대한산업공학회)
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Investigation of the Structure of the Strategic Net Present Value and Its Economic Interpretation through the Opportunity Cost Concept

기회비용 개념을 이용한 실물투자 프로젝트의 전략적 순 현재가치의 구성요소와 경제적 해석

  • Kim, Gyutai (Department of Industrial Engineering, Chosun University) ;
  • Choi, Sungho (Department of Industrial System Engineering, Kangnung University)
  • 김규태 (조선대학교 산업공학과) ;
  • 최성호 (강릉대학교 산업시스템공학과)
  • Published : 2003.06.30
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Abstract

Among a variety of models proposed by so far to calculate the real options value when the investment decision about the underlying project may be delayed, the Black-Scholes and the binomial lattice models have been widely used and discussed by academics and practitioners. However these two models do not provide us with intuition into how it is constructed and what it does really mean. In this paper, we will therefore explore its components and practically more intuitive meaning. With the components explored, we developed the mathematical model to calculate the real options value and thus strategic net present value, based on the opportunity cost concept, for which the investment decision about the underlying project is postponed by one year. We will finally present a short illustrative example for readers better understanding on the model proposed in the paper.

Keywords

References

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