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When can pessimism add value? How real option disinvestment flexibility augments project NPV

Keswani, A and Shackleton, M B (2002) When can pessimism add value? How real option disinvestment flexibility augments project NPV. Working Paper. The Department of Accounting and Finance, Lancaster University.

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    Abstract

    In this article by drawing together existing option pricing models we demonstrate how different degrees of managerial flexability can affect the value of a project. In particular we also include new option pricing results that allow us to properly take into account a firms exit option. Our paper illustrates that these disinvestment options can be valuable suggesting that managerial pessimism (i.e. consideration of outcomes if the project does not perform) can add value.

    Item Type: Monograph (Working Paper)
    Subjects:
    Departments: Lancaster University Management School > Accounting & Finance
    ID Code: 48624
    Deposited By: ep_importer_pure
    Deposited On: 11 Jul 2011 22:02
    Refereed?: No
    Published?: Published
    Last Modified: 27 Jul 2012 01:11
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/48624

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