Enhancing Financial Decision-Making: Real Options Complementing the Net Present Value Technique in the Financial Services Sector
Year: 2024
Type: article
Study design: Observational Study
Abstract: This study investigates the effectiveness of integrating real options with the Net Present Value (NPV) technique in the context of the financial services sector. The study aimed to assess how this approach enhances decision-making among financial practitioners. Using a quantitative research approach, data was collected via a questionnaire from 286 financial service participants with prior experience evaluating projects and making decisions. The results concluded that incorporating real options into traditional NPV analysis significantly improves decision-making, offering decision-makers greater flexibility and efficiency. The results suggest that when faced with hypothetical projects where initial NPV turns negative with the adoption of real options, decision-makers are more likely to make rational choices that optimize the outcome. Based on the findings, adopting a combined NPV and real options strategy for practitioners in the financial services sector is recommended to make more informed and flexible investment decisions, which would ultimately benefit their organizations and stakeholders. Future research should explore the qualitative aspects of decision-making and expand the analysis to different nations and industries.
Authors: Kyle Clifton FITZGERALD, Ferina MARIMUTHU
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $50
OpenAlex ID: W4404919894