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.
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