Portfolio-based infrastructure investment strategy for railroad company

Project based capital investment planning for developing a railroad company's infrastructure facilities does not necessarily allow managers the optimal use of their limited capital resources, because such planning simply focuses on the required cash spending and expected return from the single project. A portfolio based investment strategy aims at increasing or maximizing the value of a company's set of ground facilities, i.e., infrastructure portfolio, through quantifying the impact of strategic investments on the value of a portfolio. This study makes two approaches to the measurement of the value of infrastructure portfolios and the effect of strategic investments. First, strategic investments are considered to add certain economic values to a company, which can be interpreted as residual returns from the portfolio after rewarding its investors. Then, the value of the portfolio is analogous to that of a stock price and its dividend yield. Second, the value of a portfolio can be maximized through finding optimal strategic investment timings and its amounts. Real options approach makes use of the concept of financial option pricing as capital budgeting techniques, and it allows a company to incorporate the value of managerial flexibility in its infrastructure portfolio.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Civil and Environmental Engineering.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2002

Author dc:creator

• Sato, Takeshi, 1972-

Advisor dc:contributor.advisor

• Fred Moavenzadeh.

• Civil and Environmental Engineering.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/8419

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/8419