The real options approach to investments under uncertainty can capture the flexibility of managers to adapt and revise later decisions in response to unexpected market developments and reactions from competitors. This managerial operating flexibility can be regarded as being similar to a financial option. The value of flexibility is not captured by standard methodologies as DCF, and only partially by decision trees.
Sectors in which the technical risk is considerable, such as in pharmaceutical development , energy or the business innovations sectors, or sectors in which the market volatility is high, or the arrival of new competitors may be disruptive, such as in the Internet sector, would all benefit from this approach to evaluating projects and investments.
Fairmat Srl can help you to discover the real value of a business plan or project.
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