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| Author: | Mills, R. |
| Title: | Accounting and finance: the options approach (Investitionsstrategie) |
| Journal: | Manager Update
1997 : SUMMER, VOL. 8:4, p. 32-42 |
| Index terms: | |
| Freeterms: | UNSICHERHEIT, PROJEKTMANAGEMENT, FINANZMANAGEMENT |
| Language: | eng |
| Abstract: | How should a corporate manager facing uncertainty over future market conditions decide whether to invest in a new project? The options pricing theory has its origins in the valuation of stocks and shares. In fact, an option is a contract that makes an agreement, but not an obligation to buy (a call option) or sell (a put option) at an agreed price at a future date. The options approach can be extended in principle to capital projects, so that the opportunities inherent in a capital project can be viewed as implied contracts that allow management to choose only those actions that have positive cash-flow effects. |
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