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AReal-WorldWayto
by Tom Copeland and Peter Tufano
T' HE MARKET VALUES a growth Company largely by
estimating the prospects of its portfolio of growth
projects. These projects-research and development,
investments in new capacity, geographical expansion, and
other initiatives-are seldom simple onetime decisions;
in most cases, a company's investments are multistaged,
and at each step the company may push ahead or pull out
after gaining new information. These projects are thus options-"
rear' options, as opposed to financial options-in
which managers have the right but not the obligation to
invest. It's therefore appropriate that managers have begun
to apply option theory to help them make decisions
about these projects. Indeed, a survey of 4,000 CFOs published
in 2001 by John Graham and Campbell Harvey
found that 27% of the respondents claimed they "always
or almost always" used some sort of options approach to
evaluating and deciding upon growth opportunities.
But......

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Approximate Word Count: 7367
Approximate Pages: 30 (250 words per double-spaced page)

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