Abstract
The most widely used financial technique for evaluating projects is discounted cash flow; however, discounted cash flow analysis fails to consider flexibility. Real options analysis offers an alternative technique that provides value for managerial flexibility that is inherent in most R&D projects. This article investigates the deferral option using computer simulation. There are give variable that determine the value of the deferral option, and simulations analyze these variables over a wide range of conditions. Sensitivity analysis on the five variables is performed and the results are discussed.
| Original language | American English |
|---|---|
| Journal | Engineering Management Journal |
| State | Published - Dec 1 2004 |
Keywords
- Deferral Option
- Net Present Value
- Project Valuation
- Real Options
- Research and Development
Disciplines
- Operations Research, Systems Engineering and Industrial Engineering
- Psychology
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