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Published: 2021-04-27
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DOI: https://doi.org/10.52932/jfm.vi49.89
Issue
No. 49 (2019)
Section
Research Articles
How to Cite
Khắc Quốc Bảo, N., & Quốc Thành, L. (2021). Project appraisal of irreversible project under uncertainty: the case of carbon taxation uncertainty. Journal of Finance and Marketing, (49), 1 - 12. https://doi.org/10.52932/jfm.vi49.89

Project appraisal of irreversible project under uncertainty: the case of carbon taxation uncertainty

Nguyen Khac Quoc Bao1, Le Quoc Thanh2
1 University of Economics Ho Chi Minh City
2 University of Finance - Marketing

Main Article Content

Abstract

Most investment projects are appraised using the traditional method of discounted cash flow (DCF). The DCF method, however, is said to have many limitations with high irreversible fixed assets projects, or irreversible project in short (McDonald & Siegel, 1986). This type of project has a long lifecycle facing many uncertainties in operational period and thus these uncertainties could significantly change the expected profit. Real Option (RO) is considered more appropriate for appraisal of irreversible projects than DCF. This research synthesizes theoretical and empirical researches of the RO approach and recommends the direction of further empirical researches, as well as suggesting some background knowledges relating to RO such as uncertainty and risk, irreversibility of project, etc, to increase the possibility of applying RO in Vietnam.

Article Details

Keywords

investment project, irreversibility of project, uncertainty, investment decision, discounted cash flow, real option

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