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| Author: | Pennings, E. Lint, O. |
| Title: | The option value of advanced R & D |
| Journal: | European Journal of Operational Research
1997 : NOV, VOL. 103:1, p. 83-94 |
| Index terms: | R&D CAPITAL BUDGETING OPTION VALUATION |
| Language: | eng |
| Abstract: | The option value in R & D cannot properly be captured with existing tools for making R & D decisions. The possibility of refraining from market introduction may add a significant value to the net present value of the R & D project, since many new products are identified as failures during the R & D stages. This article presents new insights by developing a stochastic jump amplitude model in real setting. The option value of the model depends on the expected number of jumps and the expected size of the jumps in particular business. The model is verified with empirical knowledge of current research in the field of multimedia at Philips Corporate Research. |
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