Title Real Options Analysis for the Eco-Environment Area Project in Saemangeum
Authors Kim, Kyeongseok
DOI https://dx.doi.org/10.6106/KJCEM.2020.22.6.087
Page pp.87-95
ISSN 2005-6095
Keywords Saemangeum Eco-Environment Area; Real Options Analysis; Scenario; Volatility
Abstract This study analyzed economic feasibility using the real options theory of the eco-environment area project in Saemangeum. I defined the main factors affecting project sales during the 30 years operation period. The real option-based analysis is proposed through the managerial flexibility by estimating the volatility of project sales using scenarios analysis method. The number of visitors, admission fee, leisure program fee, and O&M costs required for economic analysis of ecoenvironment park were analyzed by reviewing cases of similar eco-environment parks in Korea. The option value is calculated by assuming that the developers have an option right that can be abandoned. B/C is less than 1 and NPV is negative, so it is impossible to proceed with the project using the traditional economic analysis. The project value difference between NPV (-46.6 billion Won) and option value (28.1 billion Won) increased by 74.7 billion Won. Through this study, decision-makers of public institutions and private developers who plan eco-environment area projects will be able to use the real option technique proposed in this study.