How much is flexibility worth?

Citation metadata

Authors: Thomas E. Copeland and Philip T. Keenan
Date: Spring 1998
From: The McKinsey Quarterly(Issue 2)
Publisher: McKinsey & Company, Inc.
Document Type: Article
Length: 4,492 words

Main content

Abstract :

Managers have traditionally used net present value (NPV) calculations for determining if a certain capital investment would be beneficial to a company. However, there are a lot of times when NPV data just seem like an inaccurate assessment of a great opportunity. A more flexible alternative would be to use real option value (ROV) when deciding on investments. This tool provides the entrepreneur with the right to purchase or sell an asset without being pressured to do so. A proposed investment with at least half a chance of being profitable will not be automatically discounted.

Source Citation

Source Citation
Copeland, Thomas E., and Philip T. Keenan. "How much is flexibility worth?" The McKinsey Quarterly, no. 2, Spring 1998, p. 38+. Accessed 17 Apr. 2021.

Gale Document Number: GALE|A21070378