• Umair Baig
  • Dr. Manzoor Anwar Khalidi
Keywords: Real options analysis, capital budgeting, investment appraisal process


The study aims to explore the role of the real options practices to an appraisal of capital investment decisions. We deployed the Binary logistic regression technique to test the hypotheses of the study. For the binary model, two equations were developed having two dependent variables, first the use of real options, and the second the real options familiarity. The independent variables of the study were the annual capital budget, Capex time, Net profit margin, and R&D. The finding showed listed companies relied on discounted cash flow techniques (DCF). A very few were practising real options only for supplement and to support results from other methods. The real options require too much sophistication and lack of top management support is the major reason for not using real options. The use of real options having a significant relation to the Annual Capital Budget, Net Profit Margin, and R & D, Capex time. Real options Familiarity having a significant relationship with Net Profit Margin and R & D and insignificant with Annual Capital Budget. DCF method is rigid and cannot incorporate the uncertain future and upcoming opportunities. Corporate and academia are suggested to concentrate on real options practised to make the right decision for the corporate, industry, and country progress.

Author Biographies

Umair Baig
Umair Baig is PhD- Scholar of PAF-Karachi Institute of Economics & Technology, Pakistan. E-mail:
Dr. Manzoor Anwar Khalidi
Dr. Manzoor anwar khaildi is Vice- Chancellor, Barrett Hodgson University E-Mail:


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