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Real Options: Tropical Sweets Inc Essay Example

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Real Options: Tropical Sweets Inc

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Real Options: Tropical Sweets Inc. Many of the previous theories like the NPV theory do not offer any provision in investments decisions related to projects and this may significantly undervalue the potential benefits of the particular projects.The real Options theory is closely related to the decision tree analysis and Richard Bellmans Dynamic Programming. In addition, the theory offers important additional insights on the formal perspectives of evaluation of the optimal sequential decision-making tools. Based on this theoretical perspective, the consideration of the real options in the financial analysis of a company like Tropical Sweets Inc. is critically important as it can significantly impact on the valuation of various potential investments (Brigham and Daves, 2012).

This is particularly attributed to the numerous potential benefits that are provided by real options In the above mini case of Tropical Sweets Inc., the real options theory is critically important as it can provide the important perspective of evaluation of the available choices or alternatives in a business investment opportunity which may present an investor with two different investment choices to choose from and where both of the investment choices involve tangible assets., Brosch, R., Smit, J. (2007, September 15). Business Insight Strategy: Stay Loose. The Wall Street Journal, pp. Retrieved on November 1, 2015 from http://www.The Wall Street Journal article titled “Stay loose” is primarily based on the argument that proper business planning requires real options analysis as it gives the business managers and executives the right rather than the obligation to pursue some business initiatives at particular prices at some given time in the future, thereby improving the potential outcomes of the business investment. This may particularly involve carrying out a comprehensive analysis of the various available choices or alternatives in a business investment opportunity which may present an investor with two different investment choices to choose from and where both of the investment choices involve tangible assets. Real Options: Tropical Sweets Inc.

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References

Brigham, E., Daves, P. (2012). Intermediate financial management. Mason, OH: South-Western Cengage Publishing.

Martha A., Nalin K. (2006). Real Options: Managerial Flexibility and Strategy in Resource Allocation. Cambridge, MA: MIT Press.

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