Option value

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Option value is the difference between the expected NPVs with and without the relevant option. It is the value that is not accounted for in a traditional NPV analysis. A positive option value expands the firm's opportunities.


Definitions

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Option value. The difference between the expected NPVs with and without the relevant option. It is the value that is not accounted for in a traditional NPV analysis. A positive option value expands the firm's opportunities.

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