Real Option Models in Corporate Finance

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In this section, you will find three basic real option models - the option to delay, the option to expand and the option to abandon. In addition, the value of financial flexibility is considered as an option. Spreadsheets included: • expand.xls - This model estimates the value of the option to expand in an investment project. Modified, it can also be used to assess the value of strategic options. • delay.xls - This model estimates the value of the option to delay an investment project. • flexval.xls - This model estimates the value of financial flexibility, i.e, the maintenance of excess debt capacity or back-up financing. • abandon.xls - This model estimates the value of the option to abandon a project or investment.
Source: Damodaran Online
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Subjects: Finance, Spreadsheets
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