Real Options by Spreadsheet: Parking Garage Case Example
Publication: Journal of Infrastructure Systems
Volume 12, Issue 2
Abstract
This case study shows how designers of infrastructure systems can evaluate flexibility in engineering systems in fairly simple ways. Specifically, it illustrates a spreadsheet approach to valuing “real options” in a project. The model avoids complex financial procedures, which are both inappropriate for most design issues and constitute barriers to understanding and thus achieving the substantial improvement in performance that real options enable. The spreadsheet approach uses standard procedures; is based on data available in practice; and provides graphics that explain the results intuitively. It should thus be readily accessible to practicing professionals responsible for engineering design and management. A practical application to the design of a parking garage demonstrates the ease of use and presentation of results of this approach.
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Acknowledgments
The writers appreciate the cooperation of senior staff of Laing O’Rourke (U.K.) who worked with the lead writers on the application of the spreadsheet model, and its validation through practical examples, during the Cambridge–MIT Institute Workshop on Real Options in May 2004. They are also grateful for the reviewers and editor for their advice on the presentation.
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Information & Authors
Information
Published In
Journal of Infrastructure Systems
Volume 12 • Issue 2 • June 2006
Pages: 107 - 111
Copyright
© 2006 ASCE.
History
Received: Aug 24, 2004
Accepted: Mar 22, 2005
Published online: Jun 1, 2006
Published in print: Jun 2006
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