Improving capital budgeting decisions with real options.: An article from: Management Accounting Quarterly

This digital document is an article from Management Accounting Quarterly, published by Institute of Management Accountants on June 22, 2008. The length of the article is 5018 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available immediately after purchase. You can view it with any web browser.

From the author: In this article we provide accounting practitioners with a primer on how to supplement traditional discounted cash flow (DCF) analysis with real options. We use an example of a rental car company that is considering the purchase of a new car for its rental fleet. Management is trying to decide whether to buy a conventional gasoline-engine automobile or a hybrid vehicle. Within this decision context we illustrate the embedded options the company should consider given uncertainty of a new energy bill offering income-tax credits for the purchase of commercially operated hybrid vehicles. Our step-by-step approach shows how to incorporate these real options formally into the capital budgeting process.

Citation Details
Title: Improving capital budgeting decisions with real options.
Author: David E. Stout
Publication:Management Accounting Quarterly (Magazine/Journal)
Date: June 22, 2008
Publisher: Institute of Management Accountants
Volume: 9 Issue: 4 Page: 1

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