Unlike financial options, management also have to create or discover real options, and such creation and discovery process comprises an entrepreneurial or business task. Moreover, management cannot measure uncertainty in terms of volatility, and must instead rely on their perceptions of uncertainty. management, can directly influence the value of the option's underlying project whereas this is not a consideration as regards the underlying security of a financial option. A further distinction is that option holders here, i.e. Real options are generally distinguished from conventional financial options in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security. For example, real options valuation could examine the opportunity to invest in the expansion of a firm's factory and the alternative option to sell the factory. A real option itself, is the right-but not the obligation-to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital investment project. Although there are many conceptual similarities to financial options, and the association can lead to gaining unique insight, differences in clarity regarding the definition of the underlying variables that determine option value render tools used to accurately assess the value of financial options far less convincing with respect to their “real” counterparts.Real options valuation, also often termed real options analysis, ( ROV or ROA) applies option valuation techniques to capital budgeting decisions. By doing so, it has been possible to exemplify the complexities which hinder the applicability of this model, thus making it possible to understand why the approach has not gained traction among practitioners, as has been claimed it would.
The valuation technique which is elaborated upon is based on the binomial approximation method, using project NPV as base case value. The case study applies an integrated real options approach to assess an autonomous electric vehicle project, currently in development by Apple Inc.
Proponents of the real options approach have long argued for the opportunities to gain a more unified understanding of strategic decision making under uncertainty, and bridge the gap between strategic considerations and valuation models. Real options are conceptually positioned at a point of convergence between disciplines, resulting in a challenge to integrate disparate views which may appear irreconcilable. Often times, capital investment decisions are made based on managerial intuition, given the recognized difficulties to accurately assess project value using mainstream tools such as discounted cash flow analysis, particularly in situations characterized by high uncertainty. To do so, this line of thinking is put into context, by comparison to other relevant theories in the field of strategic management, as well as the existing techniques for project valuation. Through this thesis, the objective is to determine the merits of a real options framework as managerial tool to be used with respect to making investment decisions.
0 kommentar(er)
