Monday, December 27, 2010


Summary of the Real Options, Investment Strategy and Process
  • The most important aspects of the capital budgeting process are identification, evaluation, authorisation and control
  • Identification of investment ideas is the most critical aspect of the investment process, and should be guided by the overall strategic considerations of the firm. It needs appropriate managerial focus. Each potential idea should be developed into a project.
  • A company should have system for estimating cash flows of projects. A multi-disciplinary team of managers should be assigned the task of developing cash flow estimates.
  • Once cash flows have been estimated, projects should be evaluated to determine their profitability. Evaluation criteria chosen should correctly rank the projects.
  • Once the projects have been selected they should be monitored and controlled to ensure that they are properly implemented and estimates are realised. Proper authority should exist for capital spending. The top management may supervise critical projects involving large sums of money. The capital spending authority may be delegated subject to adequate control and accountability.
  • A company should have a sound capital budgeting and reporting system for this purpose. Based on the comparison of actual and expected performance, projects should be reappraised and remedial action should be taken.
  • Companies in practice have a total capital budgeting system including processes for project identification, development, evaluation, authorisation and control. Most companies prepare a capital budget, and integrate it with the overall budgeting system.
  • Companies are increasingly using discounted cash flow techniques, but payback remains universally popular for its simplicity and focus on recovery of funds and liquidity.
  • In practice, judgement and qualitative factors also play an important role in investment analysis. A number of companies pay more attention to strategy in the overall selection of projects.
  • Strategic investments are large-scale expansion or diversification projects, and they involve either by their nature or by managerial actions valuable options. Such options include right to expand, right to abandon, right to delay, right to build new businesses, or right to disinvest or harvest.
  • Real options create managerial flexibility and commitment. In principle, they can be valued in the same way as financial options are valued. But in practice, it is difficult to get all input parameters for valuing real options. Since large number of real assets are not trade in the market, it is quite difficult therefore to get information on the value of the underlying assets and the volatility.
  • Since real options are valuable, managers must identify them, value them, monitor them and exercise them when it is optimal to do so. Managers generally strive to create flexibility and commitment by building real options into investment projects.


Thesis Writing Service said...

Amazing web journal. I delighted in perusing your articles. This is genuinely an incredible read for me. I have bookmarked it and I am anticipating perusing new articles.

Tracy Johns said...

Amazing web journal. I delighted in perusing your articles
Send Flowers to Norway

Gerald A. McDade said...

A Dissertation Writing Service UK has several chapters put together. These dissertation chapters are put down in a chronological writing.

Unknown said...

We offer unique work with a strong confirmation. What kind of confirmation? You may ponder. Online Dissertation Help

Asim Khan said...

wow amazing post it kept me busy to read long but interested .Calves and Their use in Exercise

Anonymous said...

really amazing article and very useful knowledge i really appriciate that person who is writing this article and very depth knowledge he has thanks for sharing.

Buy Online outdoor & Hunting product .

Anonymous said...

really amazing article and very useful knowledge i really appriciate that person who is writing this article and very depth knowledge he has thanks for sharing.
Good Hand Offers A Range Of Amer, Amer Services For Individuals And Organizations.

Mike Tyson said...

I'm really impressed with your effort...Thanks for sharing this informationwith us.

Bulgarian Split Squat

vipan kumar said...

Nyc posting keep up this kind of posting
blogger BlogSpot seo tips
Youtube Tips and Tricks

Jack Tucker said...

Nice well-written article. The most important thing I liked is the topic of the article. I am partially agreed with you.
Epson Printer Customer Support

Raginibhatt said...

Shweta escort agency will help you find hot call girls in bangalore. No.1 bangalore escort
service provided by shweta. If you are seeking high profile bangalore call girls sure we will deliver at home & hotel service. escorts
bangalore escorts

Raginibhatt said...

Hot and beutifull call girl service in Bangalore are you looking for call girl click here to this link : escorts
bangalore escorts

Dermapoint said...

The article was very inspiring and attractive. It also very easy to read. Thanks for sharing.

dermapoint said...

The blog was very inspirable and very attractive to inspire others. Thanks, man for sharing the blog with us.
Pls visit to our website

samayaaspa-best spa in Bangalore,raipur,kolkata,lucknow said...


thai spa in kolkata,Lucknow,Raipur,Bangalore

Dermapoint-skincare treatment in bhubaneswar said...

very nice..

Hair regrowth in Bhubaneswar

Skin care treatment in bhubaneswar

Baldness treatment in Bhubaneswar

Hair and laser clinic in Bhubaneswar

Cosmetology clinic in Bhubaneswar

Laser acne and scar treatment in Bhubaneswar

Botox clinic in Bhubaneswar

Facial contouring at Bhubaneswar and odisha

Lip re-defination at Bhubaneswar

Frawn line and forehead line correction in Bhubaneswar

samayaaspa-best spa in kolkata,Raipur,lucknow,bangalore said...

very nice..


Best spa in Kolkata

Best cross massage in kolkata

thai spa in Electronic city

Spa in Raipur

Best couple massage in Raipur

spa in Lucknow

Best ayurvedic massage in Lucknow

spa in Bangalore

Best aroma oil massage in Bangalore

Tristar Traders said...

I like your blog.You did an amzing job.Please keep it up.Searching a best web agency in Guadeloupe,
Nowel Technology is a young start-up Guadeloupe that offers innovative solutions to these customers. This really facilitates innovation of enterprises by providing the know-how and human resources to provide sustainable solutions to enhance their productivity. As a Web Agency. We can help you in the realization of a website, but also for the realization of a mobile app.

Daymon said...

Thank you for posting such a great article! I found your website perfect for my needs. 
attestation of documents

ravi kaur said...

We offer unique work with a strong confirmation. What kind of confirmation? You may ponder. Online Dissertation Help.
Best IELTS institute in Ludhiana