Using real options to value modularity in standards

Using the WACC to Value Real Options

We thank the editor and an anonymous referee. Any errors are our own. Abstract Using the WACC to Value Real Options We present a real option valuation using the weighted average cost of capital (WACC). This is an alternative to risk-neutral real option valuation. Using the WACC involves a marginal increase in mathematical complexity, but it is easy to implement in a spreadsheet, and it is easy ...

The Economic Value of Modularity in the IPQoS Network: The Real Options Approach (ROA)

As uncertainty in the markets and technologies of the network industry increases, a flexible architecture is needed by network service providers to maintain a competitive advantage. Since complete replacement of existing networks is not practical, and since it is costly for one operator to manage everything in a network, modularity in network design may be an efficient approach. This article is...

Policy options for value added to different levels of production

This paper presents an analytic procedure for the value added to different production levels with different policy options. The approach is stochastic and thus provides a framework for informed decision-making on productivity growth under uncertainty conditions. The model was applied to data collected from a firm and re-sults recommend that the firm should redevelop if in diversification and sy...

Unlocking the Value of Real Options

In the early 1990s, Houston-based Anadarko Petroleum Corporation outbid competitors for the Tanzanite block in the Gulf of Mexico. It found oil and gas there in 1998 and was producing within three years. The Tanzanite discovery is significant not so much for an abundance of oil and gas, but that in bidding for it Anadarko broke with industry tradition. Rather than using only conventional discou...

Calculating value during uncertainty: Getting real with “real options”