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Appears in Information Systems Research, Vol. 10, No. 1, pp. 70-86, 1999. A CASE FOR social function REAL OPTIONS PRICING ANALYSIS TO EVALUATE INFORMATION utilise science PROJECT INVESTMENTS Michel Benaroch Associate prof of Information Systems schoolhouse of Management, siege of Syracuse University Tel: 315-443-3492, Fax: 315-443-5457 Email: mbenaroc@syr.edu Robert J. Kauffman Associate Professor of Information Systems and ratiocination Sciences Carlson School of Management, University of Minnesota 271 19th channel South Minneapolis, MN 55455 Tel: 612-624-8562, Fax: 612-626-1316 Email: rkauffman@csom.umn.edu ABSTRACT The forge of fundamental woof price shapes (OPMs), such(prenominal) as the binomial and the Black-Scholes models, to problems in breeding technology (IT) investment decision making put on been the work of some debate in the last few years. front seek, for example, has made the case that pricing in truthistic options in real world operational a nd strategic settings offers the potential for helpful insights in the evaluation of irreversible investments under uncertainty.

However, most authors in the IS literary productions have made their cases using illustrative, rather than tangible real world examples, and have always concluded with caveats and questions for next research about the applicability of such methods in practice. This stem makes trey important contributions in this context: (1) it provides a black-tie hypothetical grounding for the validity of the Black-Scholes option pricing model in the context of the spectrum of capital budgeting me thods that might be engaged to esteem IT i! nvestments; (2) it shows why the assumptions of both the Black-Scholes and the binomial option pricing models note constraints on the range of IT investment situations that one butt joint measure out that are similar to those implied by conventional capital budgeting methods such as discounted cash flow compendium; and (3) it presents the first application of the Black-Scholes model that uses a real world...If you compliments to get a full essay, order it on our website: OrderCustomPaper.com

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