Making Real Options Realy Work  

Oleh:

MacMillan, Ian C. ; Putten, Alexander B. van

Jenis: Article from Bulletin/Magazine - ilmiah internasional
Dalam koleksi: Harvard Business Review bisa di lihat di link (http://web.b.ebscohost.com/ehost/command/detail?sid=f227f0b4-7315-44a4-a7f7-a7cd8cbad80b%40sessionmgr114&vid=12&hid=105&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bth&jid=HBR) vol. 82 no. 12 (Dec. 2004), page 134-142.
Topik: OPTIONS; accounting & control; cash flow; financial analysis; options; real options; risk management; uncertainty; valuation

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: HH10.26 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

As a way to value growth opportunities, real options have had a difficult time catching on with managers. Many CFO s believe the method ensures the overvaluation of risky projects. This concern is legitimate, but abandoning real options as a valuation model isn't the solution. Companies that rely solely on discounted cash flow (DCF) analysis underestimate the value of their projects and may fail to invest enough in uncertain but highly promising opportunities. CFOs need no - and should not - choose one approach over the other. Far from being a replacement for DCF analysis, real options are an essential complement, and a project's total value should encompass both. DCF captures a base estimate of value ; real options take into account the potential for big gains. This is not to say that there aren't problems with real options. As currently applied, they focus almost exclusively on the risks associated with revenues, ignoring the risks associated with a project's costs. It's also true that option valuations almost always ignore assets that an initial investment in a subsequently abandoned project will often leave the company. In this article, the authors present a simple formula for combining DCF and option valuations that addresses these two problems. Using an integrated approach, managers will, in the long run, select better projects than their more timid competitors while keeping risk under control. Thus, they will outperform their rivals in both the product and the capital markets.

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