THE STRATEGIC OPTIONS IN INVESTMENT PROJECTS VALUATION
THE STRATEGIC OPTIONS IN INVESTMENT PROJECTS VALUATION

Summary/Abstract: The topic of real options applies the option valuation techniques to capital budgeting exercises in which a project is coupled with a put or call option. In many project valuation settings, the firm has one or more options to make strategic changes to the project during its life. These strategic options, which are known as real options, are typically ignored in standard discounted cash-flow analysis where a single expected present value is computed. This paper presents the types of real options that are met in economic activity.

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