Cyberproblem

Fool School - Real Options

The chapter introduces the concept of real options and describes how projects can be evaluated using this approach. However, we can expand our understanding of real options to any situation in which an asset derives value from intangible sources. Real option analysis should be viewed as a complement to standard discounted cash flow analysis. Real options are likely to lie wherever you find companies with smart management teams and uncertain markets. In this cyberproblem, visit the Motley Fool's archive of feature articles, found at http://www.fool.com/archives2.htm. The "Fool's Den" featured an article in January 2001, entitled "Putting Real Options to Work". Use this article to answer the following questions regarding real option analysis.

1. How does the article define real options?
   
   
2. How and why was the concept of real options developed and popularized?
   
   
3. What are some examples of companies using real option strategies?
   
   
4. How did Mauboussin develop the concept and valuation of real options?
   
   
5. What three factors are identified as being indicators for needing real option analysis?
   
   
6. What are some ways that investors can use real options in decision-making?