Future-proofing—Valuing Adaptability, Flexibility, Convertibility and Options by David G. Carmichael

Author:David G. Carmichael
Language: eng
Format: epub
ISBN: 9789811507236
Publisher: Springer Singapore

Example.

Consider an example adapted from Liu et al. [9], using a comparable traffic volume standard deviation equal to 40% of its expected value: revenue in year 1,  = CNY207M,  = (CNY76M)2; revenue growth per year (rate),  = 7.5%; minimum threshold at year 1,  = CNY140M,  = (CNY20M)2; threshold growth per year (rate),  = 8%; interest rate, r = 5% per annum; concession period, n = 20 years; reimbursement (percentage of revenue shortfall), α = 70%. Results (V) and (VI) of Appendix 6.8 apply. and , i = 1, 2, …, 20, are assumed independent, but need not be.

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