The Role of Real Options in Capital Budgeting: Theory and Practice-super-1
AbstractMost discussions of capital budgeting take for granted that discounted cash flow (DCF) and real options valuation (ROV) are very different methods that are meant to be applied in different circumstances. Such discussions also typically assume that DCF is "easy" and ROV is "hard"-or at least dauntingly unfamiliar-and that, mainly for this reason, managers often use DCF and rarely ROV. This paper argues that all three assumptions are wrong or at least seriously misleading. 2006 Morgan Stanley.
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Bibliographic InfoArticle provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.
Volume (Year): 18 (2006)
Issue (Month): 2 ()
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- Stewart C. Myers & James A. Read, Jr., 2012. "Real Options, Taxes and Financial Leverage," NBER Working Papers 18148, National Bureau of Economic Research, Inc.
- Tor Brunzell & Eva Liljeblom & Mika Vaihekoski, 2013. "Determinants of capital budgeting methods and hurdle rates in Nordic firms," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 53(1), pages 85-110, 03.
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