A company's investment opportunities are analogous to options, and options react differently to interest rate changes than other types of assets. We examine growth option sensitivity to inflation-induced changes in interest rates using a binomial model. We find that growth options are generally...

Strategic capital investment decisions are being made every day in an increasingly uncertain world. While the traditional NPV approach does a reasonable job of valuing simple, passively managed projects, it does not capture the many ways in which a highly uncertain project might evolve, and the...