Real options valuation
Capital budgeting analysis term / From Wikipedia, the free encyclopedia
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Real options valuation, also often termed real options analysis,[1] (ROV or ROA) applies option valuation techniques to capital budgeting decisions.[2] 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.[3] 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.[4]