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Optimal land development decisions

delete2002-01-01
delete60
PRE
AI
C
Capozza, DR *
Y
Yuming Li
DOI：10.1006/juec.2001.2240delete
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Abstract

Abstract

En 中文
This research models the development decision when net rents are growing geometrically and uncertainly, and capital intensity is variable. We derive simple rules for the optimal timing of land development projects based on the commonly used internal rate of return and net present value criteria. We show that, even under certainty, projects are optimally delayed beyond the point where net present value becomes nonnegative, if expected cash flows are growing. The ability to vary capital intensity also raises the specter of perverse responses where increases in interest rates accelerate investment decisions. The positive responses occur when growth rates are high or uncertainty is high. (C) 2001 Elsevier Science.
Keywords:
INVESTMENT

Journal

Journal of Urban Economics cover
Journal of Urban Economics
IF:
4.8
Papers:
2.2K
Citations:
7.3K

Organization

No organization information available