Study on IT Infrastructure Investment Appraisal Based on Real-option Theory

In the Information Technology (IT) era, investment on IT infrastructures plays an important role for it will influence future competitiveness of enterprises. But up to the present, the study of applying real-options to IT infrastructures investment is still in its preliminary stage, and a general appraisal framework has not been established to assess IT investment by option model. In this paper, an IT infrastructure investment appraisal model is set up by real-option theories to help enterprises make the right investing decision. Finally, by sensitivity analysis, the conclusion is drawn that factors such as demand volatility and cost advantage affect the value of IT infrastructures.