Financial statements and an accompanying NPV calculation are embedded into a binomial tree. This generalization of traditional static NPV analysis allows the financial statements to both evolve through time and, at any given time, to vary with states of the world (similar to a Monte Carlo...

For the first time, a framework is introduced that allows for a real options analysis to be performed in an EVA/MVA-embedded binomial tree. This framework enhances traditional EVA/MVA analysis so that it can capture the additional value generated through strategic decision making during a...

How net present value (NPV) is implemented -- Making decisions sequential -- Option terminology and an introduction to binomial trees -- Binomial trees, risk-neutral pricing, and american style options -- Applying real option analysis with npv-embedded binomial trees -- Applying more real...

This paper provides a non-technical presentation of the theoretical foundations of corporate financial decision making and the net present value (NPV) rule. Our objective is to show that the concepts of value and value creation arise from a single, unified framework that is firmly rooted in...