Valuing Managerial Flexibility: A Child's Guide to Real Options

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Published Date:

25-Mar 04

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Keywords:

real options

Category:

Working Papers

Published in:

INFINZ Journal 2004.

Abstract

Our consulting experiences indicate that many New Zealand businesses and their managers are increasingly aware of the shortcomings of conventional methods for evaluating capital investment projects, particularly in situations where there is considerable flexibility subsequent to the project's commencement. With the busy executive in mind, we offer a brief and intuitive introduction to recently developed methods of project evaluation that explicitly incorporate managerial flexibility.