Real Option Strategic Approach to Find Optimal Company’s Source of Financing

This article is devoted to investigation and evaluation of the project expanded NPV rather than simple or passive NPV depending on its available options of financing using real option approach. This approach combines ideas of corporate finance, real options and game theory and concludes to the Risk-Neutral Probability measure and the value of a Call Option that comes from Black-Scholes-Merton model. The findings enable us to estimate the value of managerial decisions, project flexibility and help managers to select the best choice of strategic financing and its available options and their respective combination.

Keywords: strategic real options, strategic planning, strategy valuation, expanded net present value (ENPV), call option, exercise value (EV).

Publisher: 1st Global Interdisciplinary Business-Economics Advancement Conference (GIBA), Conference Proceedings, Volume 1, 2014, ISSN: 2333-4207, University of South Florida Sarasota-Manatee, USA, p.212-215.

Dmytro Shestakov

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