The real options approach is valuable when there is uncertainty and there is some evidence that it might work better than cash flow analysis for technology decisions.

Question

Quizplus · Accepted Answer

The real options approach is particularly useful in situations where there is significant uncertainty about the future, such as technology decisions. This approach allows decision-makers to consider not just the expected cash flows of a project, but also the potential future opportunities and risks associated with that project. While cash flow analysis is still important, the real options approach can provide a more comprehensive view of the potential value of a technology investment.

The Real Options Approach Is Valuable When There Is Uncertainty