Purpose – This paper aims to provide upper-level accounting and/or finance students with a review of the intricacies of option pricing, discounted cash flow (DCF) capital budgeting decision models, various types of real options, how risk analysis of long-term capital investments can be...

The paper compares the Net Present Value and the Internal Rate of Return Methods paying particular attention to Mutually Exclusive Projects. In addition it looks into the reinvestment rate assumption concept. Using a different approach to those used to‐date, it is shown that the reinvestment...

Purpose – This paper aims to provide upper‐level accounting and/or finance students with a review of the intricacies of option pricing, discounted cash flow (DCF) capital budgeting decision models, various types of real options, how risk analysis of long‐term capital investments can be...