This
paper explains that the Real Option
Valuation technique, which involves the
prediction of the returns with an assumption that the asset valuation is closely connected to the management of
assets, is an alternative over the discounted cash flow technique. The author clarifies that the Real Options Valuation technique emphasizes the value of the
flexibility of the management while making
decisions during the operation of the project; thus, it integrates the strategic planning options, such as to include, defer, abandon and other choices, which prevents committing error decisions. The paper relates that a weakness of the Real Options Valuation approach is that it neglects the influence of other parties.