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A Practical Method for Valuing Real Options: The Boeing Approach
Author(s) -
Mathews Scott,
Datar Vinay,
Johnson Blake
Publication year - 2007
Publication title -
journal of applied corporate finance
Language(s) - English
Resource type - Journals
eISSN - 1745-6622
pISSN - 1078-1196
DOI - 10.1111/j.1745-6622.2007.00140.x
Subject(s) - section (typography) , flexibility (engineering) , operations research , management , library science , computer science , engineering , economics , operating system
The Datar Mathews (DM) method is simple, transparent, allows for more insightful strategic planning and valuation and helps firms in reducing risks while improving outcomes. The different sources of uncertainty in a project are not considered properly in the NPV method. The DM method can do so more effectively. The method can give structure to early scenario based decisions and provide a way of introducing quantitative analysis.