The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
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Approach • R&D project takes *me <strong>to</strong> complete • Maximum rate <strong>of</strong> investment • Total cost <strong>to</strong> comple*on is random variable • Probability <strong>of</strong> failure (catastrophic events) • Op*on <strong>to</strong> abandon the project • When, and if, project is completed cash flows start <strong>to</strong> be generated • Cash flows are uncertain (level and dura*on) • Project is patent protected un*l *me T