The research addresses the management dilemma of a decrease in the number of capital project investments, due to the current methods of capital budgeting (i.e. net present value analysis using discounted cash flows) being ineffective, because it does not effectively deal with uncertainty in the investment, and also does take management's flexibility into account. It has been determined that a s...

Energy projects with extended life cycles and initial investments can be non-profitable under discount cash flow methods. Therefore, real options analysis has become relevant as a pricing technique for these types of projects, with private risks and high investment levels. Following this question, this study analyses different real options approaches to select the most acceptable for investing ...

In this normative paper, we derive payback period (PBP) and internal rate of return (IRR) in the presence of real options. In a Kulatilaka Trigeorgis General Real Option Pricing Model, we derive the expected value of these two decision rules that corresponds to the expected NPV Bellman dynamic programming maximizing strategy in the presence of the options to wait, to mothball and to abandon. A ...