Abstract
In this paper, a pre- and re-evaluation model with reference to evaluation costs is formulated to valuate the economic values of projets. Two types of option values, i. e., stopping options and timing options, are explicitly modeled by use of real option theory. The evaluation methodology is presented to determine the optimal timing of implementing new projects and that of scrapping existing projects. The optimal conditions of the model are given by Fredholm integral equations of type II. The solution algorithm to find out the optimal solution is also presented. The paper concludes by illustrating numerical examples to explain the properties of the pre- and re-evaluation systems presented in this paper.
