DCF vs. RO

Comparison of DCF and Real Option

1. DCF

Advantages

Easy to implement and to understand Stanard in all sectors of the economy 

Disadvantages 

1)Misses the value of flexibility and market uncertainty 

2)Not suitable for risk management

2. Real Options

Advantages

1)Captures markey uncertainty and the management's ability to react

2)Suitable for risk management

3)Improve steategic thinking if properly understood

Disadvantages 

1)Relies on more hypothesis and requires more data 

2)Technicalities 

이 승 관 경영지도사(Certified Management Consultant) 산업카운슬러 경영학박사 기술평가사 National Director of IG-WGCA Unlimited Energy WHQ [Co-author] University of Hawaii ICBP(Inter-Cultural Business Program) & KAIST-Seongnam-KAIST ICT Leadership Course Completed [Author] Entrepreneurship Startups and Jobs Creation Spirits, IT Convergence Strategy, ESG MANAGEMENT