Improving investment decision making by expanding key knowledge with real option tools

Alacarz Garcia Francisco, Markku Heikkilä

Research output: Contribution to journalArticleScientificpeer-review

4 Citations (Scopus)

Abstract

Assessment of investment profitability with discounted cash flows has proven insufficient when industry structures change. Managers need an extended flexibility in decision–making that DCF analyzes cannot offer. Real Option valuation as a method for improving flexibility in investment decisions has been widely researched but less used in business. With good support tools it is possible for managers to cross the threshold to Real Option methods and thinking. Real Option spreadsheet tools support both decision–making processes and business learning. They utilize the flexibility that new key knowledge brings to volatile industry situations and lead to better investment decisions.

Original languageUndefined/Unknown
Pages (from-to)345–368
JournalJournal of Decision Systems
Volume12
Issue number3-4
DOIs
Publication statusPublished - 2003
MoE publication typeA1 Journal article-refereed

Keywords

  • Fuzzy Logic
  • Real option valuation
  • decision-making

Cite this