What Are the Real Options
Consider the methods presented for incorporating flexibility in the budgeting process so that projects can be expanded or curtailed as the actual cash flows and growth potential become known. Also, note the reasons that senior managers may be resistant to adopt the “new generation of strategic decision analytics,” such as real options, to complement traditional capital budgeting analysis (Mun, 2006, p. 1). Finally consider how your organization, or one with which you are familiar, can benefit from using real options analysis. If real options analysis is used at your organization as a planning or budgeting tool, respond to the first bullet. If not, respond to the second bullet below.
1-If real options analysis is used at your organization, provide an explanation of how real options is supported by senior management and how it influences the allocation of financial resources.
2-Explain how you think your organization could potentially incorporate the concept of real options in your organization’s resource allocation process. Include any barriers to implementing real options you see at your organization, or one with which you are familiar, and explain how the barriers might be overcome.
