Applying real options and the maximum net present value rule to market entry/exit strategies

Applying real options and the maximum net present value rule to market entry/exit strategies

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Article ID: iaor20071099
Country: Singapore
Volume: 22
Issue: 1
Start Page Number: 71
End Page Number: 83
Publication Date: Mar 2005
Journal: Asia-Pacific Journal of Operational Research
Authors: ,
Abstract:

This study applies the real options approach to examine the maximum net present value of the market entry/exit thresholds given uncertain cash flows. The discount and growth factors are determined in the proposed entry/exit models, facilitating the complex calculation of the discount and growth rates to determine the present value of cash flow streams. Accordingly, this work successfully combines the maximum net present value method and the real options approach for decision-making by simply considering the discount and growth factors.

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