Comparison of Real Asset Valuation Models: A Literature Review

Abstract

NPV, decision trees, and real options have been prevalently practiced in real asset valuation and management. Complexities have been built on the basic frameworks in practice. In this paper, application values and limitations of real options, NPV, and decision trees in real asset valuation are illustrated with literature review. The pros and cons of each method shed light on future improvement of real asset investment evaluation and risk modeling.