Capital Budgeting and the Utilization of Full Information: Performance Evaluation and the Exercise of Real Options

Recently there has been a new interest in capital budgeting. The interest can be traced to two sources: (1) lack of satisfaction with the way that standard NPV procedures perform, and (2) the development of new financial techniques and their application to corporate finance, notably the application of option pricing models. The first source creates the demand for a critical re‐evaluation of the accepted procedures of capital budgeting, the second provides the means for such an evaluation.