Model for Evaluating the Financial Viability of the BOT Project for Highway Service Areas in South Korea

Jaewook Jeong, Changyoon Ji, Taehoon Hong, Hyo Seon Park

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

Evaluating the financial viability of a build-operate-transfer project for highway service areas (HSA BOT project) in South Korea is very important for the private sector because it does not have a risk-allocation agreement with the public sector, such as the minimum revenue guarantee. In this study, a model to evaluate the financial viability of a HSA BOT project is developed based on the discounted cash flow analysis and the real option valuation. The developed model can evaluate the financial viability of the HSA BOT project more robustly and comprehensively than existing methods by considering the characteristics of the HSA BOT project as well as the value of the HSA BOT projects due to the future uncertainty that the existing methods cannot consider. The case study shows that compared to the result from the existing methods, the result from the developed model is close to the actual results of the case project. It is expected that the private sector can use the developed model to determine the investment decision for HSA BOT projects.

Original languageEnglish
Article number04015036
JournalJournal of Management in Engineering
Volume32
Issue number2
DOIs
Publication statusPublished - 2016 Mar 1

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Highway service areas
South Korea
Viability

All Science Journal Classification (ASJC) codes

  • Industrial relations
  • Engineering(all)
  • Strategy and Management
  • Management Science and Operations Research

Cite this

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abstract = "Evaluating the financial viability of a build-operate-transfer project for highway service areas (HSA BOT project) in South Korea is very important for the private sector because it does not have a risk-allocation agreement with the public sector, such as the minimum revenue guarantee. In this study, a model to evaluate the financial viability of a HSA BOT project is developed based on the discounted cash flow analysis and the real option valuation. The developed model can evaluate the financial viability of the HSA BOT project more robustly and comprehensively than existing methods by considering the characteristics of the HSA BOT project as well as the value of the HSA BOT projects due to the future uncertainty that the existing methods cannot consider. The case study shows that compared to the result from the existing methods, the result from the developed model is close to the actual results of the case project. It is expected that the private sector can use the developed model to determine the investment decision for HSA BOT projects.",
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Model for Evaluating the Financial Viability of the BOT Project for Highway Service Areas in South Korea. / Jeong, Jaewook; Ji, Changyoon; Hong, Taehoon; Park, Hyo Seon.

In: Journal of Management in Engineering, Vol. 32, No. 2, 04015036, 01.03.2016.

Research output: Contribution to journalArticle

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