Abstract
In this paper, an economic evaluation methodology of projects is presented, which explicitly incorporates economic loss of project delay. In many projects, the implementation timing is typically regulated by uncontrollable social and political factors. In our model, the political risks are characterized by the probabilities of project delay. The real option model is formulated to determine the optimal investment rules when the implementing timing of the project is uncertain and exogenously determined by political risks. The economic loss caused by project delay can be mea sured by calculating option values.
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