Project option valuation: A case study

Abstract

The objective of the company is to create wealth by initiating and managing investments that generate future cash flows that are worth than the costs of the investment. Effective capital budgeting can improve both the timing and the quality of asset acquisitions. It influences financial performance and health of the company. The purpose of this paper is to provide a detailed economic analysis of the investment project valuation by using traditional Net Present Value and flexible real options method. The purpose of this study is to analyze and verify the application of the real options methodology for investment decision making.