Real options mitigate the risk of the rejection good projects
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Abstract
The article presents the basic principles of real options method (ROM) for the assessment of projects realized by enterprises. Using as an example a loan contracted for three years, the author shows and explains why the ROM is much more effective and better analyzes tool, than the discounted cash flow method (DCF). He also stresses, that from the methodological point of view ROM is not more difficult in application than the DCF, moreover adds flexibility in the decision-making process, and gives for the management staff more freedom in a future, during the undertaking development.
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