How Options Analysis Can Enhance Managerial Performance

Discounted cash flow analysis is the most common method for valuing projects in a company, but an increasing number of practitioners are now using options methodology to get a truer picture of the real value of a project. This article covers the discounted cash flow methodology, and how this tool fails to fully capture flexibility and uncertainty. After a short overview of financial options, the article covers the main principles behind options valuation of projects.