Engineering Commons^™

Valuation Of Flexibility And Investment Timing In Airport Infrastructure Projects: Cases In Airport Expansions And Alternate Design Alternate Bid Bidding, Ilker Karaca

Ilker Karaca

Many large infrastructure projects are subject to considerable uncertainty over their revenue streams which makes their valuations particularly challenging. When project scalability can be altered as new information is revealed over the course of a project’s lifecycle, the presence of uncertainty can, in fact, provide option values that are ignored with static Net Present Value (NPV) analyses. To achieve these benefits, however, a better understanding of volatility is of the essence. This dissertation seeks to demonstrate how a better understanding of the business risks could facilitate the valuation of flexibility options in investment timing and engineering design. It also details …