Dixit and pindyck start their classic book on real options, Ask an Expert

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Dixit and Pindyck start their classic book on real options with the following example:

You are tossing a fair coin. If it turns up heads, you win $1. If it turns up tails, you lose $1. Your expected value from playing the game is $0.

Now suppose that you have the option to place a bet, but that you don't have to bet until you know the result of the coin flip. What is that option worth? What, if anything, does this example tell you about the real options approach to capital budgeting?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92411844

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