The
purpose
of
this
paper
is
to
analyse
the
Hospital
de
Cascais
“Dr.
José
de
Almeida”,
built
under
a
Public
and
Private
Partnerships’
program,
in
order
to
understand
if
the
private
partner
will
be
responsible
for
the
hospital’s
management
until
the
end
of
the
contract
(in
2018)
or
if
it
will
step
out
due
to
financial
losses.
Such
analysis
will
be
done
using
a
Real
Options
approach,
through
the
use
of
abandonment
options.
Two
scenarios
will
be
considered:
in
the
first
one
the
operational
costs
will
follow
the
same
evolution
as
expected
in
the
Base
Case
(86,7%
of
the
revenues).
In
the
second
scenario
the
operational
costs
will
be
assumed
to
be
95%
of
the
revenues,
to
better
reflect
the
past
performance
of
the
hospital.
Moreover,
for
each
of
these
scenarios
two
discount
rates
will
be
used
to
compute
the
Net
Present
Value:
one
is
the
discount
rate
used
by
the
government
to
assess
the
value
of
the
public
sector
comparator
(PSC):
6,08%;
the
other
is
the
Weighted
Average
Cost
of
Capital
(WACC),
which
changes
every
year
to
match
with
the
changing
debt
ratio.
The
results
show
that
in
the
first
scenario
the
optimal
decision
is
to
continue
in
the
project
and
not
do
the
step
out,
since
the
Real
Options
analysis
shows
that
the
stepping
out
provides
savings
smaller
than
the
profit
they
would
obtain
from
continuing.
However,
in
the
second
scenario
the
optimal
decision
is
to
abandon
the
project.
It
is
also
concluded
that
the
DCF
model
underestimates
the
value
of
the
project
by
ignoring
the
flexibility
HPP
has
to
step
out
