Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/15567

TitleReal options theory in comparision to other project evaluation techniques
Author(s)Fernandes, Bartolomeu
Cunha, Jorge
Ferreira, Paula Varandas
KeywordsReal options
Project evaluation
Discounted cash flow techniques
Issue date2011
PublisherUniversidade do Minho
Abstract(s)Wrong investment decisions today can lead to situations in the future that will be unsustainable and lead eventually to the bankruptcy of enterprises. Therefore, good financial management combined with good capital investment decision-making are critical to survival and long-term success of the firms. Traditionally, the net present value (NPV) and discounted cash flow (DCF) methods are worldwide used to evaluate project investments. These techniques have been classified in two major groups: sophisticated and non-sophisticated. In the former group, techniques like the DCF methods (e.g. NPV and IRR) can be found. In the latter group, techniques like the Payback Period and the Accounting Rate of Return have been included. However given that, today investments are characterized by high risks and uncertainty, DCF methodologies are inadequate to deal with these issues. Some authors argue that only the techniques that can appropriately address the problem of uncertainty (like the Real Options theory) should be applied. In this paper, the major differences between DCF methods and Real Options (RO) theory will be analyzed. Using an example, the advantages of the RO theory, compared with other methods, such as the DCF methods, in the search of better decisions will be shown. This work is expected to contribute to an increase of application of the RO Theory, by showing this technique potential.
TypeConference paper
URIhttp://hdl.handle.net/1822/15567
Peer-Reviewedyes
AccessOpen access
Appears in Collections:CGIT - Publicações em actas de encontros científicos / Papers in conference proceedings
CITEPE - Publicações em actas de encontros científicos / Papers in conference proceedings

Files in This Item:
File Description SizeFormat 
fernandes_cunha_ferreira_ICOPEV2011.pdf74,92 kBAdobe PDFView/Open

Partilhe no FacebookPartilhe no TwitterPartilhe no DeliciousPartilhe no LinkedInPartilhe no DiggAdicionar ao Google BookmarksPartilhe no MySpacePartilhe no Orkut
Exporte no formato BibTex mendeley Exporte no formato Endnote Adicione ao seu ORCID