Krychowski, Charlotte (2007) The benefits and limits of real options to strategic decision making. An applied study in the telecommunications industry. PhD thesis Sciences de gestion, GREGHEC - UMR 2959, HEC p.339.

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Abstract

Real options has been identified by academics as a promising capital budgeting tool. Yet, its use by firms appears to be limited. The implementation of the option theory, especially the valuation, raises serious difficulties. Our research question is as follows: How can real options play a role in strategic decision making ? To answer it, we have conducted three real case studies in the telecommunications industry. We test an alternative valuation method based on Monte Carlo simulations (MCS). We find that MCS enable the evaluation of the option in an intuitive way, while taking into account the complexity of a real investment project. Our research identifies three roles of real options in investment decisions: a valuation role, a communication role and a role of preparing future decisions

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