New Orleans, Louisiana
June 26, 2016
June 26, 2016
August 28, 2016
An undergraduate tutorial on real-options analysis used in teaching an advanced engineering economy course is presented. The tutorial includes the binomial option pricing model and the Black-Scholes model. Reasons for using real-options analysis are included, as well as examples of calculations of the values of financial options and real options for a variety of investment scenarios. Implications of real-options analysis on the way engineering economy is taught are also treated. Specifically, the need to incorporate multiple discount rates and continuous compounding and terminal value in economic justifications is addressed. Lessons learned from using the tutorial twice with a class are shared.
White, J. A. (2016, June), Using a Real-Options Analysis Tutorial in Teaching Undergraduate Students Paper presented at 2016 ASEE Annual Conference & Exposition, New Orleans, Louisiana. 10.18260/p.27125
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