Deciding on new products using a computer-assistedreal options approach

Technical and market uncertainties are significant challenges forR&D management. Especially, in the case of New Product Development(NPD), investment decisions have to be made under uncertainty due tounknown costs and returns which arise from project complexity and duration.The framework of real options has been proposed for a better understandingof R&D project’s uncertainty, for modelling management’s flexibility duringthe project and for selecting the best project alternative. This paper describesthe application of a real options approach to the management of NPD projectsusing standard computer-assisted add-ons to spread sheet technology...