Affiliations: [a] Graduate School of Information, Production and Systems, Waseda University, Japan
Corresponding author: Cong Li, Graduate School of Information, Production and Systems, Waseda University 2-7 Hibikino, Wanakamatsu, Kitakyushu, Japan. E-mail:[email protected]
Abstract: Capital investment plays a pivotal role in making a company win in a market. In the
real world, capital investment is a gradual behaviour, which means that a capital investment project can be divided into multiple stages that can effectively reduce the risks of the investment project. Because the future movement of the market is influenced by various uncertain factors, companies cope with such uncertainties in an effective and timely manner via decision-making using continuously developing and robust tools. The objective of this research
is to propose a method that satisfies the requirements of companies. Real option analysis is a relatively new and insightful way to evaluate corporate investment decisions. When undertaking new investments, firms may have options to invest in stages. Moreover, decision-makers often face the situation of having incomplete information. To handle this situation and address problems under uncertain circumstances in the research, a granularity approach is introduced that includes fuzzy variables and credibility theory. In the granularity approach, uncertainty such as fuzzy numbers is taken as a granule, which enables us to take fuzzy numbers not only for uncertain values but also for decision values in a group.
Keywords: Compound real option, capital investment, granularity, fuzzy variable, credibility, uncertainty