Capital-investment-decisions

Having used the book in the course taught by Merino, I have noticed that the examples given at the end of each chapter are erroneous in nature. Many a time, I have found that the book lacks the basic elements of engineering economics. This book is definitely not for undergraduates.

While there is no disagreeing that this book is written at an advanced level, it does clearly present key concepts that are often difficult to understand apart from each other. I used a newer version of this book in Merino's class, and it really is the best book in its class.

Some of the more complex topics like multi-attribute analysis and risk management are presented well. After-tax analysis is not presented in as much depth as I would have liked, but after going through the examples the topic becomes clear.

Overall this book is excellent. It is a must read for those aspiring to go into management or get an MBA one day.

The editor of this book, Lenos Trigeorgis, earned his Ph.D. from Harvard University, and has since that published several articles in distinguished journals on one of his favourite research subjects - real options. By using basic option pricing principles in capital investments, a practicing manager as well as an academic can develop financial models that handle stochastic information, for instance oil prices. The capital investment theories explained in this book is the greatest breakthrough in capital investments since the 60's. The widely accepted DCF-method should partly be replaced by Option Pricing Models, OPM, as this is the first method that can handle volatility and uncertainty in a theoretically consistent way. Several academics are finding this difficult to accept - the old "truth" doesn't hold is a volatile environment! If you believe in Discounted Cash Flow analysis - you MUST read this book! If you want to stay ahead of your competitors, you SHOULD read THIS comprehensive book on capital investments! It may require a lot more maths that any other books on the subject, as the book is rather theoretical with several real life examples. Most of the 20 authors have a background in maths as well as economics, something preferrable but not necessary for the reader of this excellent book. The book could be recommended for MBA and PhD students. Niklas Uddstrom (niklas.uddstrom@mandatum.fi)

Actually, I'd give it 3.5 stars. Excellent exposition and developement of material. However, there are quite a few typo's that would throw the reader with less math off the trail (and possibly some with good math). Good coverage of different types of cases, underlying math, real world appications and properties of solutions. Personally, I would have preferred all the rigorous material (including math proofs) in the one book rather than making statements and referring to seminal real options papers very often. Some credit is due here, however, as there are some proofs in appendices at the end of each chapter - I think these could have gone into a little more detail and depth - (I say this only because there isn't the vast library of books on this subject that exists for more mature disciplines - guess I was looking for a more comprehensive reference.) I have read Trigeorgis' other books so this was not an introduction. Liked the book, learnt a lot and am applying it to real life projects, however had to learn a fair bit on my own too.

This book gives you the latest update on what's going on in real options theory. Brilliant throughout, but its really too hard mathematically to be of much value for someone who's not a math-person. I found the chapter on the Antamina mine to be immensely interesting. It was originally used as a case study on options theory at Harvard and shows you how these academics went about valuing a peruvian mine. It's a very valuable chapter because it is focused on the practical side of real options theory. The chapter on "Rules of thumb for capital budgeting" didn't make much sense at all to me. The rest of the chapters are no easy read, but if you feel up to it mathematically, you're going to find this a very interesting book. If your not that much into mathematics, I think it's going to leave you rather frustrated. This book cannot have been meant as a guide for practitioners, it's more of a field day for academics, that's my impression at least.

OK, I admit the year has not ended yet, but that doesn't mean you mus not read this: now! This book is co-edited by Trigeorgis, one of the most proeminent author in the area. It deals with all the new developements on real options. It's objective is to give the researcher or student a key to enter the world of real options. Contributions are worldwide, mainly by people with a strong mathematical background. This makes it sometime difficult to understand for more management focused readers. However the book by the quality of the writting and the new ideas it brings, keeps you awake like a thriller. To be own by any person who want's to know about the future (nearly present) of corporate finance.