Research on economic benefits of the Jinghan Canal: a valuation based on real options model

To address the inherent limitations of the traditional Net Present Value (NPV) method in evaluating the Jinghan Canal project, this study applies real options theory to develop a deferral option (estimated via the Black-Scholes model) and an abandonment option (calculated using the binomial tree model), thereby systematically assessing the project ’ s economic benefits and investment risks. Even with the integration of flexible option strategies—including "delayed decision-making" and "abandonment clauses"—the project fails to meet the threshold of economic feasibility due to two critical structural constraints: substantial initial capital outlays and ongoing rigid maintenance expenditures. Sensitivity analysis further validates the robustness of this conclusion: adjustments to key parameters, including freight volume, maintenance cost ratio, and the risk-free rate, do not reverse the negativity of the total project value. Based on these findings, this paper recommends conducting additional pragmatic feasibility studies and promptly suspending preliminary investment activities to avoid irreversible risk exposure. This research contributes theoretically by applying real options in large-scale water transport infrastructure valuation and practically by providing a scientific basis for project investment planning, offering a replicable framework for quantifying decision flexibility in similar projects.