CHAPTER 13

Real Options, Investment Strategy and Process

LEARNING OBJECTIVES

  • Explain the capital budgeting process.
  • Document the policies and practices of companies in India.
  • Discuss the linkage between corporate strategy and investment decisions.
  • Define strategic real options.
  • Calculate the value of option to expand.
  • Calculate the value of option of commercialising a patent.
  • Calculate the value of option to abandon a project.
  • Calculate the value of the option to delay or wait.
INTRODUCTION

Capital expenditure or investment planning and control involve a process of facilitating decisions covering expenditures on long-term assets. Since a company’s survival and profitability hinges on capital expenditures, especially the major ones, the ...

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