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Valuation of industrial giga-investments: theory and practice

M. Collan. University of Turku


Industrial giga-investments are long term irreversible very large, hundred million-class, industrial real investments that have a long building time. These investments are important to the companies undertaking them and to the economy as a whole. Giga-investments can sometimes even steer their markets. Giga-investments are different from financial and small real investments in many respects, but are often analysed and valued by using the same methods; this is most often not realistic and does not offer best possible decision support.

In this paper we discuss and present industrial giga-investments. We discuss their special characteristics that require attention, when their profitability and value are analyzed. An industrial giga-investment case is presented and a numerical illustration of how industrial giga-investments can be valued with the pay-off method is presented.



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