This paper selects an actual company and conducts a case study with respect to a new business for the company.We observe that the company is starting a membrane ceilings business alongside its existing business selling iron.We apply a real options approach to it and provide valuable implications with regard to managerial decision-making under uncertainty.In this paper, in addition to the standard Net Present Value method and the option pricing theory under risk, the potential model risk is explicitly analyzed.For this reason, this paper analyzes the business under ambiguity.In order to analyze the actual business, we first develop a systematic procedure for deriving managerial flexibility under uncertainty.This includes specifying important risk factors, seeking real options, parameter estimation, handling ambiguity, and deriving the optimal strategy. It reveals that the company is subject to four sources of uncertainty and has two types of real options.Furthermore, we formulate the business as a multiplier robust control problem to evaluate the project value under ambiguity.Our quantitative analysis shows that the real options have a significant impact on the project value of the membrane ceilings business.It further shows that, although the presence of ambiguity changes the optimal exercise strategy,the difference between the optimal strategy under ambiguity and that under risk is not significant from a practical viewpoint.
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