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The Strategic Options In Investment Projects Valuation

Author

Listed:
  • VIOLETA SĂCUI

    (WEST UNIVERSITY OF TIMIȘOARA)

  • FRANCA DUMITRU

    (TIBISCUS UNIVERSITY OF TIMISOARA)

Abstract

The topic of real options applies the option valuation techniques to capital budgeting exercises in which a project is coupled with a put or call option. In many project valuation settings, the firm has one or more options to make strategic changes to the project during its life. These strategic options, which are known as real options, are typically ignored in standard discounted cash-flow analysis where a single expected present value is computed. This paper presents the types of real options that are met in economic activity.

Suggested Citation

  • Violeta Săcui & Franca Dumitru, 2012. "The Strategic Options In Investment Projects Valuation," Anale. Seria Stiinte Economice. Timisoara, Faculty of Economics, Tibiscus University in Timisoara, vol. 0, pages 494-499, November.
    • Handle: RePEc:tdt:annals:v:xviii/supplement:y:2012:p:494-499
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    References listed on IDEAS

    as
    1. Martha Amram, & Nalin Kulatilaka,, 1998. "Real Options:: Managing Strategic Investment in an Uncertain World," OUP Catalogue, Oxford University Press, number 9780875848457.
    2. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-985, December.
    3. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    4. Robert McDonald & Daniel Siegel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 707-727.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    investment project; real option; valuation; strategic; flexibility;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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