search query: @author Teisberg, E. / total: 3
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| Author: | Teisberg, E. |
| Title: | An option valuation analysis of investment choices by a regulated firm |
| Journal: | Management Science
1994 : APR, VOL. 40:4, p. 535-548 |
| Index terms: | INCENTIVES ELECTRICITY CAPITAL INVESTMENT |
| Language: | eng |
| Abstract: | This paper analyzes a utility power plant construction project using an option pricing model of the value of the capital investment. It includes descriptive factors frequently ignored in the valuation of capital investments by regulated firms, including lead time, lumpy and sequential cost outlays, irreversibility of expenditures, and uncertainty about regulatory outcomes for completed project. The analysis shows the value of shorter lead time technologies, the value of flexibility to delay or abandon construction, the incentive to delay construction under uncertain regulation, and how cost recovery policies create incentives to invest less, but to complete construction quickly. |
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