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Summaries and Short Reviews

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Real Option Valuation

Book Summary by: AcaDemon    


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.
Published: November 12, 2006
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