MANAGING INFORMATION TECHNOLOGY INVESTMENTS WITH REAL OPTIONS ANALYSIS

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RASOULI SOMAYEH; Afshari Ahmad J.; SALMANI SERAJI MARYAM

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Paper Information

Journal: JOURNAL OF ASSET MANAGEMENT AND FINANCING Year:2017 | Volume:5 | Issue:2 (17) Page(s): 185-200

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Title

MANAGING INFORMATION TECHNOLOGY INVESTMENTS WITH REAL OPTIONS ANALYSIS

Author(s)

RASOULI SOMAYEH | Afshari Ahmad J. | SALMANI SERAJI MARYAM | Issue Writer Certificate

Keywords

REAL OPTIONSQ1

INVESTMENTQ2

INFORMATION TECHNOLOGYQ2

RISK MANAGEMENTQ2

Abstract

Most of the organizations do not have enough knowledge about how to evaluate future INVESTMENTs in INFORMATION TECHNOLOGY. Most of these types of decisions are taken in management board. As a result, very few organizations have deep knowledge about the value of the funds invested in the field of INFORMATION TECHNOLOGY. In this research, INVESTMENT in an ERP project considering expansion and contraction options based on REAL OPTIONS theory is studied. The findings showed that the value estimated based on REAL OPTIONS which considers flexibility in management decisions is different from the outcome of discounted cash flow method. Based on the value analysis of expansion option, current asset value is estimated 1998 million Rials for current project. If today's project is extended, the asset value will become 3086 million Rials which is much more than the asset value without imposing the right of expansion. So, imposing the right of expansion has 1088 million Rials added value. Also, imposing the right of project contraction, the estimated value is 1182 million Rials. So, project contraction is irrational. Finally, based on the evaluation of the options, a strategic road map is proposed for the one year life span of the project.

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APA: Copy

RASOULI, SOMAYEH, Afshari, Ahmad J., & SALMANI SERAJI, MARYAM. (2017). MANAGING INFORMATION TECHNOLOGY INVESTMENTS WITH REAL OPTIONS ANALYSIS. JOURNAL OF ASSET MANAGEMENT AND FINANCING, 5(2 (17) ), 185-200. SID. https://sid.ir/paper/245640/en

Vancouver: Copy

RASOULI SOMAYEH, Afshari Ahmad J., SALMANI SERAJI MARYAM. MANAGING INFORMATION TECHNOLOGY INVESTMENTS WITH REAL OPTIONS ANALYSIS. JOURNAL OF ASSET MANAGEMENT AND FINANCING[Internet]. 2017;5(2 (17) ):185-200. Available from: https://sid.ir/paper/245640/en

IEEE: Copy

SOMAYEH RASOULI, Ahmad J. Afshari, and MARYAM SALMANI SERAJI, “MANAGING INFORMATION TECHNOLOGY INVESTMENTS WITH REAL OPTIONS ANALYSIS,” JOURNAL OF ASSET MANAGEMENT AND FINANCING, vol. 5, no. 2 (17) , pp. 185–200, 2017, [Online]. Available: https://sid.ir/paper/245640/en

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