The Economic Evaluation Research On The BOT Project Of Construction Waste Management

Abstract:The rapid urbanization has improved the development of construction industry, and increased the amount of construction waste. The traditional way to manage construction waste is landfilling, which can neither conforms to the sustainable development strategy, nor meets the requirement of environmental protection. Thus, to seek a new way to handle construction waste is very important. Real option approach, which is the application of option in the field of real asset investment, is a new way to investment decision-making. Compared with traditional investment evaluation methods, real option approach can overall show the project’s uncertainties, which can create extra value if the investors take some soft management. It indicates that the real option approach can comprehensively respond to project’s true value. By analyzing the economic characters of the BOT project of construction waste management, the prospects of construction waste management and the possibility of social capital to participate in the construction waste management, the paper comes to the conclusion that BOT is a feasible way to construction waste management. On this basis, the paper discriminates the cash flow of the BOT project of construction waste management. After the analysis of its features and uncertainties, it determines that the BOT project of construction waste management contains delay option, growth option, government guarantee option and so on. As the real options are compound that is not suitable for simple algebraic addition and the influence of uncertainties on the project is ultimately reflected in the present value of cash flow and investment cost, the paper comprehensively studies real option of uncertainties on model building and empirical analysis, Then, Based on the exposition of the typical binomial pricing model and B-S pricing model, and the characteristics of real investment and the BOT project of construction waste management, it introduces the concept of fuzzy number, and establishes fuzzy intervals of the expected present value of cash flow and investment cost, thereby, it builds a fuzzy real option model on account of B-S pricing model, and obtains the fuzzy intervals of project value. Later on, using the single factor sensitivity analysis probes the parameters and reveals their sensitivity respectively, and summarizes the steps to adopt real option approach as well as illustrates the evaluation criteria, which provides guidance for investment decisions-making. Finally, the paper verifies the model’s operability by empirical analysis.