Real Options approach to estimate financial benefit of advanced process control

Benefit estimation is one of the most important parts of feasibility study of investment projects. In order to make a solid business justification in investment, the management team always quantified the benefit from the projects. Current industrial approach to estimate benefit of advanced process control (APC) is based on the conventional estimation techniques, namely, statistical analysis and payback period. Due to the chaos information and uncertainties of business environment, these conventional techniques cannot effectively provide the alternative consideration of the investment. In this paper, we develop the Real Options technique for the benefit estimation with application to APC. The Real Options technique will be employed to the Innovative Recommender System for control system project assessment tools as part of the Integrated Economic Assessment (IEA) Framework. We demonstrate the effectiveness of the proposed method to a case study of control automation project subject to business environment uncertainty.