The Real Options Solution To A Cost-Of-Capital Dilemma
نویسندگان
چکیده
منابع مشابه
Real Options – Capital Budgeting
Most investment decisions present the following three characteristics: • Irreversibility: The investment is partially or completely sunk, i.e. it cannot be recovered. • Uncertainty: The best that can be done is to assess the probabilities of the alternative outcomes that can imply larger or smaller profits. • Timing: The decision can be postponed in order to get more information (but never comp...
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15 صفحه اولThe Application of Real Options to Capital Budgeting
Real options theory suggests that managerial flexibility embedded within irreversible investments can account for a significant value in project valuation. Although the argument has become the dominant focus of capital investment theory over decades, yet recent survey literature in capital budgeting indicates that corporate practitioners still do not explicitly apply real options in investment ...
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Recent studies have emphasized the role of irreversibility, flexibility, and uncertainty in assessing the financial implications of regulated access pricing in the telecommunications market (Pindyck 2004, 2005). In particular it has been argued that mandatory unbundling of the local loop creates optionalities (real options), leading to a transfer of wealth from incumbents to entrants unaccounte...
متن کاملReal Options and Adverse Incentives: Determining the Incentive Compatible Cost-of-Capital
In this paper, we examine the real options approach to capital budgeting in the presence of managerial adverse incentives. We show that real options have the potential to be value enhancing or value destroying depending on managerial incentives. We further examine the possibility of using a generic residual income based rule of managerial compensation to induce the proper investment incentives ...
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ژورنال
عنوان ژورنال: Journal of Business & Economics Research (JBER)
سال: 2010
ISSN: 2157-8893,1542-4448
DOI: 10.19030/jber.v8i2.667