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|Type:||Artigo de evento|
|Title:||The Pitfalls Of Capital Budgeting When Costs Correlate To Oil Price|
|Abstract:||This paper investigates the economic relationship that exists between oil price and operating costs in the E&P industry and its implications for the capital budgeting and decision-making processes. We present empirical evidence that there is a positive correlation between price and operating costs, and that overlooking this relationship has severe implications for the valuation of investment projects, both using a traditional Net Present Value (NPV) methodology or a Real Option approach. In the traditional NPV method, overlooking a price-cost correlation results in undervalued projects, and under Real Option Analysis, projects tend to be overvalued if such correlation is ignored.|
|Appears in Collections:||Unicamp - Artigos e Outros Documentos|
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