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Real options use the concept of an option as the right but not the obligation to buy or sell an asset. In looking at investment
- Real options use the concept of an option as the right but not the obligation to buy or sell an asset. In looking at investment projects with large capital expenditures such as whether to drill for oil in a new field managers often use this approach to planning their investment spending in stages. How would this approach be used to manage the risks in a large project, and why is it preferable to the use of discounted cash flows when setting up a capital budget?
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