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Applying Real Options And The Maximum Npv Rule To Market Entry/Exit Strategies

Author

Listed:
  • TYRONE T. LIN

    (Department of International Business, National Dong Hwa University, Hualien, Taiwan, R.O.C.)

  • TUNG-LI SHIH

    (Graduate School of Management, Chung Yuan Christian University, Chung-Li, Taiwan, R.O.C.)

Abstract

This study applies the real options approach to examine the maximum net present value of the market entry/exit thresholds given uncertain cash flows. The discount and growth factors are determined in the proposed entry/exit models, facilitating the complex calculation of the discount and growth rates to determine the present value of cash flow streams. Accordingly, this work successfully combines the maximum net present value method and the real options approach for decision-making by simply considering the discount and growth factors.

Suggested Citation

  • Tyrone T. Lin & Tung-Li Shih, 2005. "Applying Real Options And The Maximum Npv Rule To Market Entry/Exit Strategies," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 22(01), pages 71-83.
    • Handle: RePEc:wsi:apjorx:v:22:y:2005:i:01:n:s0217595905000443
    DOI: 10.1142/S0217595905000443
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