Applying the maximum net present value rule in valuing real options

This study addresses the feasibility of using traditional net present value to assess project value, and uses the real options approach to apply maximum net present value given an investment project with either certain or uncertain cash flow streams. This work explores a market entering model and extends to entry and/or exit models. The discount factor is priced using real options, making it easier to calculate the complicated discount rate to assess the present value of cash flow streams. Consequently, the optimal thresholds for market entry and/or exit can be derived using the proposed discount factors.