Download or read book Real Options Valuation of a Power Generation Project written by Bruno Merven and published by . This book was released on 2008 with total page 86 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Real Options Really Have Any Value written by CMA CA(ICAEW) MBA(UK) FCCA (CIA, CISA, PMP, CFE, Mohiuddin Asad) and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Introduction In this article, author has designed a real-life example to demonstrate evaluation of real options. He has selected a Power Generators Company which is reviewing an “Option to delay” for a special solar power generators project. Author has collected current data from market and has made realistic assumptions about future cash flows, volatility and time horizon. Based on this information, he has first calculated the value of project using discounted cash flow techniques and then calculated the value of the project by real option valuation techniques, using Black-Scholes model. He has used excel spreadsheets for above computations and has varied critical inputs to demonstrate their impact on net present value (NPV) and real option value which is supported by graphical illustrations also. In the final section, Author has discussed the difference between NPV and real option value, explaining why or why not one should always be greater than the other and which variables affect the difference between these two valuations. Finally, he has assessed the reliability of the conclusions obtained using NPV versus real options approach.

Download or read book Real R D Options written by Dean Paxson and published by Elsevier. This book was released on 2002-12-05 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: Real R&D options are among the earliest modelled real options, with now ten primary practical uses: general R&D planning, planning R&D in stages, evaluating test information, new product development timing, operations, abandonment, risk sharing, market funding, industry strategy and regulation. This book was partly motivated by requests to identify and develop real option models for R&D in telecommunications, petroleum technology and biotechnology. Nine new models cover information and implementation costs, analytical solutions for mean reverting, or fat tailed revenues, endogenous learning and exogenous and experiential shocks, American sequential options, and innovator advantages. Four new applications include forward start development options, exploration options, innovation with information costs, and innovator's real values with changing market share. R&D directors and researchers will find several uses for these models: general R&D planning evaluating test information new product development timing risk sharing industry strategy and regulation A practical guide to how organizations can use Real Option techniques to effectively value research and development by companies Provides a rigorous theoretical underpinning of the use of Real Option techniques Real Options applications are orientated around the economies of North America, Europe and Asia, for an international perspective

Download or read book Real Options Theory written by Jeffrey J. Reuer and published by Emerald Group Publishing. This book was released on 2007-07-05 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt: Examines the ways in which real options theory can contribute to strategic management. This volume offers conceptual pieces that trace out pathways for the theory to move forward and presents research on the implications of real options for strategic investment, organization, and firm performance.

Download or read book Project Valuation Using Real Options written by Prasad Kodukula and published by J. Ross Publishing. This book was released on 2006-07-15 with total page 256 pages. Available in PDF, EPUB and Kindle. Book excerpt: Business leaders are frequently faced with investment decisions on new and ongoing projects. The challenge lies in deciding what projects to choose, expand, contract, defer, or abandon, and which method of valuation to use is the key tool in the process. This title presents a step-by-step, practical approach to real options valuation to make it easily understandable by practitioners as well as senior management. This systematic approach to project valuation helps you minimize upfront investment risks, exercise flexibility in decision making, and maximize the returns. Whereas the traditional decision tools such as discounted cash flow/net present value (DCF/NPV) analysis assume a “fixed” path ahead, real options analysis offers more flexible strategies. Considered one of the greatest innovations of modern finance, the real options approach is based on Nobel-prize winning work by three MIT economists, Fischer Black, Robert Merton, and Myron Scholes.

Download or read book Real Options and Asset Valuation in Competitive Energy Markets written by Adekunle Richard Oduntan and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Real Options Valuation in Energy Markets written by Jieyun Zhou and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Real options have been widely applied to analyze investment planning and asset valuation under uncertainty in many industries, especially energy markets. Because of their close analogy to financial options, real options can be valued using the classical financial option pricing theories and their extensions. However, as real options valuation often involves complex payoff structures and operational constraints of the underlying real assets or projects, accurate and flexible methods for solving the valuation problem are essential. This thesis investigates three different approaches to real options valuation and contributes to aspects of modeling realism and computational efficiency. The contributions are illustrated through two important applications of real options in energy markets: natural gas storage and power plant valuation.

Download or read book Real Options in Practice written by Marion A. Brach and published by John Wiley & Sons. This book was released on 2003-04-07 with total page 384 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explores real option theory applied in practice Real options are quickly becoming the valuation and decision-making method of choice for many companies, including oil and gas companies, utilities and natural resource companies, pharmaceutical and biotech companies, Internet companies, and many others. Real Options in Practice allows readers to view the world of real options from the vantage point of a corporate practitioner applying real option valuation techniques on a regular basis. Expert Marion Brach describes the challenges of implementing a real option framework in practice within a corporate setting. Touching on the real options most firms care about, Real Options in Practice identifies the classic types of real options-deferral, abandonment, switching, expansion, and compound-and explores the main concepts critical to understanding real option theory. Through Brach's own three-step real option valuation method readers will learn how the theory of real options is now being applied to drive better, more profitable corporate decision-making. Marion A. Brach, MD, MBA (Hagen, Germany), has undertaken financial valuation of business opportunities and acquisitions using scenario and real option valuation in the biotech industry. A recognized expert on real option theory and practice, Brach received her MBA from the Manchester Business School and frequently speaks at real option seminars.

Download or read book Real Options and Energy Management written by Ehud I. Ronn and published by . This book was released on 2002 with total page 752 pages. Available in PDF, EPUB and Kindle. Book excerpt: A multi-author title that focuses on both the fundamentals of real options, and the practical approaches for their application in the energy industry

Download or read book A Real Options Approach to Renewable and Nuclear Energy Investments in the Philippine written by Casper Boongaling Agaton and published by Logos Verlag Berlin GmbH. This book was released on 2019-07-10 with total page 124 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents the application of real options approach (ROA) to analyze investment decisions for switching energy sources from fossil fuels to alternative energy. Using the Philippines as a case, the ROA models presented here explore how uncertainties including fossil fuel prices, electricity prices, discount rates, externality, renewable energy (RE) costs, and RE investment growth affect investment decisions that focus on developing countries, particularly to fossil-importing countries. The book is a collection of academic papers published in peer-reviewed journals. The first paper analyzes investments in various RE sources including wind, solar, hydropower, and geothermal over using coal. The second paper compares investments between RE and nuclear energy considering the risk of nuclear accident. The third paper applies the proposed ROA model with the case of Palawan island and analyzes investment in RE over diesel fuel for electricity generation. The fourth paper focuses on investment drivers that make RE sources as a better option than using fossil fuels.

Download or read book Real Options In Energy And Commodity Markets written by Nicola Secomandi and published by World Scientific. This book was released on 2016-11-28 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: The field of real options is concerned with the management and financial valuation of operational flexibility in business endeavors. From the very outset, energy and commodity markets — which play fundamental roles in the worldwide economy — have provided a relevant context for real option analysis, both in theory and practice.This volume is a collection of six chapters covering recent research on real options in energy and commodity markets, reflecting the significance of these markets for real option analysis. The volume is divided into two parts — the first on theory and the second on methods and applications.The two chapters in the first part of the book respectively address commodity storage and the concept of convenience yield, and how the management of real options can be impacted by the trader's own market decisions in the context of commodity shipping.The four chapters in the second part of the book propose and apply real option models in various domains — modeling the evolution of futures prices of emission certificates; managing copper extraction illustrated with an application to a project at Codelco, Chile, the largest copper producer in the world; the core ideas behind real option analysis in the context of the merchant management of hydrocarbon cracking operations; and optimizing the portfolio of contracts that oil refineries use to market their gasoline production.

Download or read book Real Options written by Lenos Trigeorgis and published by MIT Press. This book was released on 1996-03-14 with total page 452 pages. Available in PDF, EPUB and Kindle. Book excerpt: Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. In the 1970s and the 1980s, developments in the valuation of capital-investment opportunities based on options pricing revolutionized capital budgeting. Managerial flexibility to adapt and revise future decisions in order to capitalize on favorable future opportunities or to limit losses has proven vital to long-term corporate success in an uncertain and changing marketplace. In this book Lenos Trigeorgis, who has helped shape the field of real options, brings together a wealth of previously scattered knowledge and research on the new flexibility in corporate resource allocation and in the evaluation of investment alternatives brought about by the shift from static cash-flow approaches to the more dynamic paradigm of real options—an approach that incorporates decisions on whether to defer, expand, contract, abandon, switch use, or otherwise alter a capital investment. Comprehensive in scope, Real Options reviews current techniques of capital budgeting and details an approach (based on the pricing of options) that provides a means of quantifying the elusive elements of managerial flexibility in the face of unexpected changes in the market. Also discussed are the strategic value of new technology, project interdependence, and competitive interaction. The ability to value real options has so dramatically altered the way in which corporate resources are allocated that future textbooks on capital budgeting will bear little resemblance to those of even the recent past. Real Options is a pioneer in this area, coupling a coherent picture of how option theory is used with practical insights in into real-world applications.

Download or read book Real Options Theory Applied to Renewable Energy Generation Projects Planning written by Eduardo Alejandro Martinez-Cesena and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The existing environmental threats and the ever increasing global dependence on electric power highlight the importance of producing power in a sustainable manner. In accordance, it is vital to attract investments in electricity generation projects based on renewable energy sources, also called renewable energy projects (REP). This poses a challenge, as REP tend to be less financially competitive than their fossil fuel based counterparts. Moreover, the power grid has to be upgraded to integrate large amounts of RESs in an efficient and economic manner. An appealing alternative to enhance the financial appealing of REP is to improve the techniques used for their assessment. These tools produce robust and economically sound assessments, but tend to undervalue REP and other projects under uncertainty, as they neglect the flexibility of the projects to be adjusted in response to uncertainty. This can be corrected by extending the tools with the aid of real options (RO) theory. RO theory can be used to extend assessment techniques to value flexibility derived from the projects, their management, and even their environment, which can be used to enhance the financial value of REP in the changing power sector. In addition, the scope of RO theory is increasing to address flexibility in the design of the projects. Therefore, the theory can drive investments in REP and motivate the design of more profitable projects. This research project seeks to analyse the potential of RO theory to increase the financial worth of different types of REP in the current and changing power sector. The novelties of this research are that it expands RO theory by addressing the flexibility within the design of the projects, the potential of RO theory to manage uncertainties that are exclusive to the projects or typical in the power sector, and other relevant areas of research interest. The research produced several RO methodologies to model the planning, operation, and design of hydropower projects, wind power projects, and solar photovoltaic projects in existing power sector environments and environments characterised by high penetration of RESs and consumers with demand response capabilities. The results demonstrate the applicability of RO theory to enhance the financial value of different types of REP under a wide range of circumstances.

Download or read book Applied Real Option Valuation written by Kaveh Sheibani and published by ORLAB Analytics. This book was released on 2010-06-30 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Supporting investment profitability analysis and decision-making with real option analysis is an issue of increasing interest among both practitioners and managers. This special issue of the Journal of Applied Operational Research (JAOR) presents some new progress in applying real option analysis and valuation to real world problems in a number of industries.

Download or read book Modern Asset Pricing and Project Evaluation in the Energy Industry written by David G. (David Graham) Laughton and published by . This book was released on 2000 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Capital Budgeting Valuation written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2011-06-28 with total page 533 pages. Available in PDF, EPUB and Kindle. Book excerpt: An essential guide to valuation techniques and financial analysis With the collapse of the economy and financial systems, many institutions are reevaluating what they are willing to spend money on. Project valuation is key to both cost effectiveness measures and shareholder value. The purpose of this book is to provide a comprehensive examination of critical capital budgeting topics. Coverage extends from discussing basic concepts, principles, and techniques to their application to increasingly complex, real-world situations. Throughout, the book emphasizes how financially sound capital budgeting facilitates the process of value creation and discusses why various theories make sense and how firms can use them to solve problems and create wealth. Offers a strategic focus on the application of various techniques and approaches related to a firm's overall strategy Provides coverage of international topics based on the premise that managers should view business from a global perspective Emphasizes the importance of using real options Comprised of contributed chapters from both experienced professionals and academics, Capital Budgeting Valuation offers a variety of perspectives and a rich interplay of ideas related to this important financial discipline.

Download or read book Valuation of Energy Companies Using Real Options Modeling written by Maria Alexandrovna Kaneva and published by . This book was released on 2006 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt: Liberalization of energy industry is the worldwide process. Restructuring implies the transformation of a vertically integrated system into separate companies competing for production and distribution of electric power, and the development of central competitive market for energy sale and purchase. At the same time, liberalization posed new problems. Appraisal of the real value of energy companies became one of the most topical questions. Privatization of an enterprise requires the data about its market value. A wide spectrum of methods intended for evaluation of companies is available, among them: company capitalization, total value of assets, and total value of company projects. The latter technique suggests valuation of projects using the method of net present value (NPV). However, at present the NPV approach is subjected to valid criticism in both electric-power industry and other sectors.The studies showed that this method does not take into account uncertainty in calculating the project key parameters, for instance, cash flow. In addition, it disregards the existence of sunk costs, i.e., the irreversibility of project after its commencement. It is known that decision about the start of the project can be postponed. The delay allows managers to acquire additional information on the project and external environment, and thus make a decision based on the acquired information. Value of the delay is ignored when calculating the net present value. This paper illustrates an alternative valuation method. The spark-spread option with fixed costs is used to valuate the largerst Russian electricity-generating company Mosenergo. The results are compared to capitalization and market values.