We clarify that real options are not confined with real assets only. Patent, R&D, Brand etc. are examples of assets that save a value to the owner. The capital investments should be viewed as a strategic investment that incorporates the real options. Valuing a real option is a real challenge for the managers in UK 3.
1) How UK Investors can use the concept of "real options" to explain part of the difference in market value and the intrinsic value as calculated using traditional methods. Real options represent what is possible beyond the current business operations. Investors can ignore real options, try to find real option value for free, or consciously seek out companies that have abundant real option value.
4) How real options in part to explain the gap between how the stock market prices some businesses and the "intrinsic value" for those businesses as calculated by traditional financial analysis, specifically discounted cash flows.
This Chapter is dedicated to evaluate investment; initiatives Net Present Value (NPV) and Return on Investment (ROI) are commonly used 4. But sometimes it becomes very difficult to measuring the value of investment for new project or technology due to their wider scope of application. The Projected cash flows seem meager in comparison to the investment required. ...