ABSTRACT
By using the real options approach, manufacturing firms can value the flexibility that exists or that is planned for operation. In addition, firms can gain insight on the optimal strategic decisions for future price levels. Real options valuation also enables sensitivity analysis of its inputs, that is, impacts of input parameter changes on profitability can be estimated. Several scenarios show that real options analysis can be used to support managerial decision making for manufacturing-related operations, such as contracting a portion of the production, abandoning the operations, choosing among a number of strategies, and switching technologies.
