Estimating the Value of the Option to Expand an Investment Project
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Estimating the Value of the Option to Expand an Investment Project
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The user has to define the following inputs to the model:
1. Present value of expansino potential
2. Annualized standard deviation
3. Initial investment needed for expansion option
4. Number of years you have rights to project
5. Costs associated with waiting an extra year to expand
6. The riskless rate that corresponds to the option lifetime
Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)
1. Present value of expansino potential
2. Annualized standard deviation
3. Initial investment needed for expansion option
4. Number of years you have rights to project
5. Costs associated with waiting an extra year to expand
6. The riskless rate that corresponds to the option lifetime
Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)
