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An Introduction to Real Options. Incorporating Flexibility to Quantitative Strategic Analysis
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Reference: DGN-616-E
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Number of pages: 23
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Publication Date: Jun 27, 2001
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Source: IESE (España)
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Type of Document: Technical Note
Description
At the time of making strategic investments, managers are increasingly dissatisfied with the lack of realism of the existing quantitative methods of capital budget valuation. Standard valuation techniques, based on the calculation of discounted cash flows, have been massively questioned due to their inability to capture management's flexibility to adapt and revise later decisions in response to unexpected market developments. This note addresses this problem, introducing the Real Options framework as an insightful valuation tool that helps to assess contingent strategic opportunities in a more realistic way, while at the same time preserving the discipline, rigor and objectivity of the quantitative methods of valuation.
Learning Objective
Incorporar en el alumno conocimientos acerca de la utilización de Opciones Reales.