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- Title
Evaluation of Small Aircraft Manufacturing Process: A Real Option Theory Approach.
- Authors
Kamalabadi, Isa Nakhai; Saberi, Esmaeel; Mohammadzadeh, Mahdi; Amalnik, Mohsen Sadegh
- Abstract
The aircraft industry is one of the most adventurous areas in investment due to its need for huge investments faced by various risks and uncertainties. The traditional project assessment methods in this industry suffer from a systematic approach in considering the risk and uncertainty and often ignoring the value of various options in project life. In this paper, we develop a seven step model based on Real Option Theory to evaluate project from both perspectives of risk and cost by using an extended binomial tree. At last, Monte Carlo simulations are done by considering the uncertainties as a distinct factor from the risks which in previous researches used to be examined jointly. While the traditional approaches don't justify the project, our results of the proposed model approve doing the project by revealing its real values.
- Subjects
AIRCRAFT industry; REAL options (Finance); RISK assessment in project management; MONTE Carlo method; BINOMIAL theorem
- Publication
Production & Operations Management (2251-6409), 2014, Vol 5, Issue 2, p54
- ISSN
2251-6409
- Publication type
Article