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Project Valuation Using Real Options by Chandra Papudesu, Prasad Kodukula

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REAL OPTIONSANALYSISCALCULATIONS

Discounted cash flows (DCFs), simulations, and decision trees are relatively easy methods to understand, because the theoretical framework behind these methods is rather simple and requires no more than freshman college mathematics. DCF and decision tree analyses are also relatively easy from a computational standpoint; a handheld calculator will suffice. Simulations, however, will take enormous time with a handheld calculator and require special software because of the hundreds of simulations involved. Real options analysis (ROA) is far more complex compared to these traditional tools and requires a higher ...

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