What is real options analysis?
Real options analysis is a method used to evaluate investment opportunities by considering the flexibility to adapt decisions based on changing circumstances.
How does it differ from traditional NPV analysis?
Unlike traditional NPV analysis, which assumes a static environment, real options analysis incorporates the value of flexibility and future decision-making.
Can you give me an example of real options analysis in practice?
Sure! For instance, a company considering a new project can use real options analysis to decide whether to expand, delay, or abandon the project based on market conditions.
What are the key benefits of using real options analysis?
The key benefits include better risk management, improved decision-making under uncertainty, and the ability to capture the value of flexibility.
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