ACCA P4考官文章 real option.pdfVIP

The global body for professional accountants About us Contact us Work for us Technical activities Help support Global Search My ACCA Search Home Students Exam resources Professional level P4 Advanced Financial Management Technical articles Student Accountant hub page Real options’ valuation methodology adds to the conventional net present value (NPV) estimations by taking account of real life flexibility and choice. This is the first of two articles which considers how real options can be incorporated into investment appraisal decisions. This article discusses real options and then considers the types of real options calculations which may be encountered in the P4 paper, through three examples. The article then considers the limitations of the application of real options in practice and how some of these may be mitigated. The second article considers a more complex scenario and examines how the results produced from using real options with NPV valuations can be used by managers when making strategic decisions. The conventional NPV method assumes that a project commences immediately and proceeds until it finishes, as originally predicted. Therefore it assumes that a decision has to be made on a now or never basis, and once made, it cannot be changed. It does not recognise that most investment appraisal decisions are flexible and give managers a choice of what actions to undertake. The real options method estimates a value for this flexibility and choice, which is present when managers are making a decision on whether or not to undertake a