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Strategic construction mechatronics valuation: A real option-pricing approach.

Taylor, Mark D; Wamuziri, Sam

Authors

Sam Wamuziri



Abstract

This paper presents the application of real option-pricing theory to the appraisal of advanced construction technology (ACT) investment opportunities. Discounted cash flow appraisal techniques alone do not take into account managerial investment flexibility and neglect timing, abandonment, process switching and sequential strategic growth options. Timing and strategic growth options are valued for hypothetical investment opportunities. Valuable insight into the intrinsic value of investment deferral, optimal expenditure timing and sequential investment opportunities is presented. Real optio-pricing analysis provides a technique for amalgamating strategic planning with investment appraisal. The presented methodology does not replace the need for managerial judgement, but may assist technology strategy decision making within construction organisations. Furthermore, the strategic value of construction automation investment may appear more advantageous when appraised using real option-pricing theory.

Citation

Taylor, M. D., & Wamuziri, S. (2002). Strategic construction mechatronics valuation: A real option-pricing approach. Journal of Financial Management of Property and Construction, 7, 75-90

Journal Article Type Article
Publication Date Aug 1, 2002
Deposit Date Apr 23, 2008
Print ISSN 1366-4387
Electronic ISSN 1759-8443
Publisher Emerald
Peer Reviewed Peer Reviewed
Volume 7
Pages 75-90
Keywords Advanced construction technology; Construction mechatronics; Real option-pricing; Strategic valuation; Review;
Public URL http://researchrepository.napier.ac.uk/id/eprint/2022