Multi-stage real options: The cases of information technology infrastructure and international bank expansion

https://doi.org/10.1016/S1062-9769(99)80096-9Get rights and content

This paper examines multi-stage real options applications that have strategic import beyond that captured by standard DCF valuation approaches. After reviewing the concept of multi-stage options in the case of R&D, the paper analyzes two actual case studies: the information technology infrastructure decision by a telecommunications authority; and the international expansion option by a bank. It is shovm that options valuation can justify making such strategic investment decisions even if NPV suggests otherwise.

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