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Write 4 page essay on the topic Real Options: Tropical Sweets Inc.According to the real options theory, some of the possible procedures that can effectively be incorporated in the analysis of real opt
Write 4 page essay on the topic Real Options: Tropical Sweets Inc.
According to the real options theory, some of the possible procedures that can effectively be incorporated in the analysis of real options include decision tree analysis, DCF analysis of cash flows and modeling of the available financial options. However, many of the previous theories like the NPV theory do not offer any provision in investments decisions related to projects and this may significantly undervalued the potential benefits of the particular projects.  .The real Options theory is closely related to the decision tree analysis and Richard Bellman's 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 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. The Wall Street Journal article titled “Stay loose”.