Developing A Model for Uncertainty Identification and Flexibility Enhancement in Capital Budgeting Decisions Based on Real Option Approach (Case Study: A photovoltaic Plant in the South of Isfahan)

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Mashhadizadeh Mohammad; DASTGIR MOHSEN; SALAHSHOUR SOHEIL

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Journal: JOURNAL OF FINANCIAL MANAGEMENT STRATEGY Year:2021 | Volume:8 | Issue:31 Page(s): 157-186

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Title

Developing A Model for Uncertainty Identification and Flexibility Enhancement in Capital Budgeting Decisions Based on Real Option Approach (Case Study: A photovoltaic Plant in the South of Isfahan)

Author(s)

Mashhadizadeh Mohammad | DASTGIR MOHSEN | SALAHSHOUR SOHEIL | Issue Writer Certificate

Keywords

Capital BudgetingQ1

Real OptionQ1

UncertaintyQ1

Fuzzy LogicQ1

Abstract

Economic appraisal of investment projects requires a new thought referred to as Real Option theory given the governing Uncertainty over their financial conditions which can cover deficiencies of traditional methods of Capital Budgeting such as stationary and not considering Uncertainty factors. According to this theory, a model was proposed in the present study to identify and rank environmental uncertainties and effective managerial flexibilities or options on investment decisions in a photovoltaic plant in the south of Isfahan. To this end, Uncertainty factors of this plant were identified via field study from the viewpoint of a sample consisted of 36 experts through confirmatory factor analysis. Then, impact factor of each factor on advantages and expenses of the above plant was evaluated using the fuzzy hierarchical analysis. In the next step, the effect of these options on the project value was tested by means of linear regression method. Tools of data collection were two researcher self-made questionnaires. Validity and reliability of each questionnaire were confirmed through Lawshe's content validity index and Cronbach's alpha coefficient. The results indicated the effect of Uncertainty factors on investment environment of the plant and a significant relationship between the use of Real Option and flexibilities with increased effect of investment in this plant. Meanwhile, the experts positively evaluated the effect of expansion, wait and abandonment options to increase the flexibility of investment decisions in this plant.

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APA: Copy

Mashhadizadeh, Mohammad, DASTGIR, MOHSEN, & SALAHSHOUR, SOHEIL. (2021). Developing A Model for Uncertainty Identification and Flexibility Enhancement in Capital Budgeting Decisions Based on Real Option Approach (Case Study: A photovoltaic Plant in the South of Isfahan). JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, 8(31 ), 157-186. SID. https://sid.ir/paper/408467/en

Vancouver: Copy

Mashhadizadeh Mohammad, DASTGIR MOHSEN, SALAHSHOUR SOHEIL. Developing A Model for Uncertainty Identification and Flexibility Enhancement in Capital Budgeting Decisions Based on Real Option Approach (Case Study: A photovoltaic Plant in the South of Isfahan). JOURNAL OF FINANCIAL MANAGEMENT STRATEGY[Internet]. 2021;8(31 ):157-186. Available from: https://sid.ir/paper/408467/en

IEEE: Copy

Mohammad Mashhadizadeh, MOHSEN DASTGIR, and SOHEIL SALAHSHOUR, “Developing A Model for Uncertainty Identification and Flexibility Enhancement in Capital Budgeting Decisions Based on Real Option Approach (Case Study: A photovoltaic Plant in the South of Isfahan),” JOURNAL OF FINANCIAL MANAGEMENT STRATEGY, vol. 8, no. 31 , pp. 157–186, 2021, [Online]. Available: https://sid.ir/paper/408467/en

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