Aswath Damodaran Session 22: The Options to Delay and Expand
In today’s class, we completed our discussion of the option to delay by looking at natural resource options, i.e., undeveloped reserves owned by natural resource companies. We argued that these reserves will be under valued using conventional DCF approaches, which ignore the optionality embedded in them, and that the option premium would increase with the uncertainty about natural resource prices. We also looked at the options to expand into new markets or products and how it derives its value from exclusivity. I am attaching the post-class test and solution.
Start of the class test: www.stern.nyu.edu/~adamodar/pdfiles/eqno
Slides: http://www.stern.nyu.edu/~adamodar/po…
Post class test: http://www.stern.nyu.edu/~adamodar/pd…
Post class test solution: http://www.stern.nyu.edu/~adamodar/pd…
