Principles for drafting an investment policy with illustrations

Investment policy with time-to-build

Most capital projects have an implementation lag. We examine the effect of implementation lag on a levered firm’s investment decision. The main finding is that implementation lag can potentially have a substantial effect on a levered company’s investment trigger, and this effect can be significantly different from that of an unlevered company. The exact relationship between lag and investment t...

Drafting with Sequences

The numbers on the inner circle are those that exist in the modular arithmetic. If we continue beyond 7, as shown in the outer ring, the numbers wrap around the wheel. Numbers on the same spoke are equivalent. For example, 0 and 8 are equivalent, 1 and 9 are equivalent, 2 and 10 are equivalent, and so on. Another way to look at it is that when 9 is introduced into modular arithmetic with 8 shaf...

Mena Investment Policy Brief

National, regional and international competitiveness of an economy is increasingly connected to the presence of an environment supportive of innovation and risktaking. Innovation is gaining prominence on agendas of governments throughout the world who increasingly appreciate the need to develop knowledge-based economies as a prerequisite to competitiveness and growth. Given this recognition, it...

Optimal Investment Policy for Real Option Problems with Regime Switching

Real option analysis (ROA) is a way of valuing real assets by invoking option pricing theory. In contrast to the traditional net present value approach, ROA makes it possible to explicitly incorporating management flexibility. Because of such advantages, ROA has become an important tool for project valuation and is widely used in practice. In this paper, we develop a real option model with regi...

A Policy Framework for Investment: Human Resource Development Policy