Using Real Option Pricing to Value the Public R&D Investment on the Deep Seabed Manganese Nodule Project

This paper attempted to measure the monetary value of technical development on the deep seabed manganese nodule, by applying the compound option model (COM). The COM is appropriate for the project in terms of its decision-making structure and embedded uncertainty. From the estimation results it is shown that deep seabed mining project has more economic potential than the previously obtained results from the discounted cash flow (DCF) analysis. In addition, it is reasonable to invest to the project taking the various uncertainty factors into consideration; for the ratio of the value to the cost of the project is far higher than one. This information can be utilized in decision-makings in national ocean policy