Project Valuation Using Real Options: A Practitioner's Guide

"To invest or not to invest?" Business leaders frequently are faced with this question on new and ongoing projects. The challenge lies in deciding what projects to choose, expand, contract, defer, or abandon. The project valuation tools used in this process are vital to making the right decisions. Traditional tools such as discounted cash flow/net present value assume a "fixed" path ahead.

But real world projects face uncertainties, forcing you to change the path often. This book introduces a more practical approach to project valuation known as real options analysis. Derived from options theory in modern finance, this approach is based on the Nobel Prize-winning work of three MIT economists. Project Valuation Using Real Options provides a systematic approach to project valuation that will enable you to minimize investment risks, exercise flexibility in decision making, and maximize returns. Key Features Discusses why traditional valuation methods such as discounted cash flow, net present value and decision tree analysis are not sufficient in today's uncertain world Explains the real options approach in a step-by-step manner which is easily understood and does not require an extensive financial background on the part of the reader Shows you how to make the correct investment decisions, achieve strategic alignment of projects, increase project flexibility, and sustain competitive advantage Presents multiple scenarios and real world examples from technology, telecommunications, pharmaceuticals, and other industries to illustrate success stories, challenges, and the true value of real options analysis WAV offers free downloadable assessment tools and solutions to problems presented in the book - available from the Web Added ValueT Download Resource Center