Topic: Ch: 9 “Multi-Period Capital Budgeting Under Uncertainty: Real Options Analysis”

8394 Words Jan 19th, 2014 34 Pages
Prepared By
Mohammad Alamgir Hossain Department of Finance
Jagannath University, Dhaka

Multi-period Capital Budgeting under Uncertainty: Real Options Analysis”

Table of Contents Section | Name | Page no. | Letter of Transmittal | i | Acknowledgement | ii | Table of Contents | iii | Section-A | Introduction | 01-02 | | A.1 Introduction | 01 | | A.2 Rationale of the study | 01 | | A.3 Objective of Our Study | 02 | | A.4 Scope | 02 | | A.5 Methodology of the Study | 02 | | A.6 Limitations of the Study | 02 | Section-B | Comparing NPV with Decision Trees and Real Options | 03-08 | | B.1 Comparing NPV with Decision Trees and Real Options | 03-05 | | B.2 Recognizing Real Options | 05 | |
…show more content…
They include the market value of the property, the market risk, the rate of return, the current market situation, rate of inflation and the uncertainties relevant to the investment. Every investor must have the adequate information when they think of investment. The choice of investment between two alternatives is also a major criteria .but the multi period capital budgeting under uncertainty is as realistic as complicated. The main topic of the assignment is multi period capital budgeting under uncertainty which is mentioned in the chapter 9 of the text of {modern financial theory}. We are concerned with the multi period investment decision under certainty. In this case the net present value model gives very suitable form of making an investment decision. but in case of multi period investment decision under uncertainty net present value has limitation where there is no flexibility in making future decision to face the uncertainty.yhe main theme of this topics is to highlight the some basic assumption of NPV and decision trees and how real option analysis is worked? The role of risk neutral probabilities in ROA, three key assumption and combinations of simple real options are also mentioned. Next it is mentioned what to do and when the underlying risky asset paying dividend. There are different types of real options, switching options, they also mentioned here and it is highlighted how they are

Related Documents