A platform for research: civil engineering, architecture and urbanism
A platform for research: civil engineering, architecture and urbanism
Investment Valuation of Construction Projects Under Uncertainty
Although many factors, including noneconomic barriers (e.g., regulatory and environmental factors), influence decision-making about construction projects, when it’s time to invest, many construction project owners should allocate their limited financial resources to projects with the highest returns on investment. However, the investment valuation of construction projects is subject to significant uncertainties, such as substantial construction cost variations that make decision-making difficult. This chapter presents several investment valuation methods, such as a stochastic life-cycle cost analysis technique and a real options analysis method, to evaluate investments in construction projects under uncertainties. The stochastic life-cycle cost analysis captures the volatility of the input variables in investment valuation based on their historical values, propagates them through the life-cycle cost analysis method, and determines the probability distribution of the life-cycle cost. Real options analysis evaluates real (nonfinancial) investments under uncertainty with elements for strategic management flexibility and delayed investment. Various examples of construction investment valuations, along with the R codes, are presented in this chapter to enhance the learning experience. These resources can be extended for the assessment of other construction investment projects.
Investment Valuation of Construction Projects Under Uncertainty
Although many factors, including noneconomic barriers (e.g., regulatory and environmental factors), influence decision-making about construction projects, when it’s time to invest, many construction project owners should allocate their limited financial resources to projects with the highest returns on investment. However, the investment valuation of construction projects is subject to significant uncertainties, such as substantial construction cost variations that make decision-making difficult. This chapter presents several investment valuation methods, such as a stochastic life-cycle cost analysis technique and a real options analysis method, to evaluate investments in construction projects under uncertainties. The stochastic life-cycle cost analysis captures the volatility of the input variables in investment valuation based on their historical values, propagates them through the life-cycle cost analysis method, and determines the probability distribution of the life-cycle cost. Real options analysis evaluates real (nonfinancial) investments under uncertainty with elements for strategic management flexibility and delayed investment. Various examples of construction investment valuations, along with the R codes, are presented in this chapter to enhance the learning experience. These resources can be extended for the assessment of other construction investment projects.
Investment Valuation of Construction Projects Under Uncertainty
Shahandashti, Mohsen (author) / Abediniangerabi, Bahram (author) / Zahed, Ehsan (author) / Kim, Sooin (author)
Construction Analytics ; Chapter: 6 ; 95-124
2023-04-25
30 pages
Article/Chapter (Book)
Electronic Resource
English
Construction investment valuation under uncertainty , Real options analysis , Stochastic life-cycle cost analysis , Binomial decision tree , Monte Carlo simulation , Investment decision-making under uncertainty Engineering , Construction Management , Building Construction and Design , Building Materials , Investment Appraisal , Civil Engineering
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