Ethanol crush spreads are used to model the value of a facility which produces ethanol from corn. A real option analysis is used to investigate the effects of model parameters on the related managerial decisions of (i) how to operate the facility through optimal switching from idled to...

This paper presents an economic interpretation of the optimal “stopping” of perpetual project opportunities under both certainty and uncertainty. Prior to stopping, the expected rate of return from delay exceeds the rate of interest. The expected rate of return from delay is the sum of the...