FAQ Number 8

Does Real Options Theory (ROT) Speed Up the Firms Investments or Slow Down Investment?

Answer: depends of the kind of investment

In general, if your investment process creates new options or learning effects, the real options speeds up investment when compared with static discounted cash flow.
Investments in R&D, in training, new distribution channels, etc., create new options that can be exercise in the future depending of the market evolution.

The next FAQ will show that real options can even to recommend project with negative static NPV.

Go to the Next FAQ: 9) Is possible real options to recommend investment on a negative NPV project?

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