PREEVALUATION AND REEVALUATION OF PROJECTS

Abstract

In this paper, an evaluation methodology of projects is presented, which explicitly incorporates interactions bewteen preevaluation and reevaluation. The benefits of reevaluation is to reduce the irrevesibility issues caused by the projects. The benefits of revising the foregoing decision making given the additional information which can be obtained as time goes by can be formulated as two types of real options: exiting options and timing options. The real option theory provides the basic scheme to integrate the evaluation results obtained in deferent points in time.