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Project Valuation Using Real Options by Chandra Papudesu, Prasad Kodukula

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REAL OPTIONSANALYSIS APPLICATION

The Nobel Prize–winning work by Fischer Black, Myron Scholes, and Robert Merton in 1973 helped solve a complex financial options pricing problem that had perplexed economists since the early 1900s. Although the theory behind the solution is mathematically complex, the now famous Black-Scholes equation is so simple that you need no more than high school math to use it in pricing financial options, once the input parameters are known. Whereas the Nobel Prize–winning breakthrough laid the groundwork for financial options, it is not widely used to value real options because of its limited applicability and inherent ...

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