Fundamental options: Payoffs from a project such as the mining of minerals increase or decrease the value of an investment depending on whether they will find the said mineral.
An expansion project is a capital project that involves a company increasing its business size. Expansion projects are independent projects because they do not affect the cash flows of the rest of the company. Cash flows of expansion projects can be categorized as follows: Initial investment outlay.
Getting your CFA charter allows you to gain analytical skills and expertise in quantitative methods, economics, financial reporting, investment analysis, and portfolio management. This set of skills and knowledge you will develop as you become a CFA charterholder will serve you well throughout your career.
CFA – Construction Floor Area is the area of all building enclosed covered spaces measured to the outside face of the external walls including covered basement and above ground car park areas.
Real options may be classified into different groups. The most common types are: option to expand, option to abandon, option to wait, option to switch, and option to contract.
Examples of real options include determining whether to build a new factory, change the machinery and technology on a production line, decide whether to buy potentially lucrative oil fields and when to start drilling or pumping, etc. They do not include derivative financial instruments such as stocks or bonds.
How a call option works. Call options are “in the money” when the stock price is above the strike price at expiration. The call owner can exercise the option, putting up cash to buy the stock at the strike price. Or the owner can simply sell the option at its fair market value to another buyer before it expires.
IRR is useful when comparing multiple projects against each other or in situations where it is difficult to determine a discount rate. NPV is better in situations where there are varying directions of cash flow over time or multiple discount rates.
This study showed an overall IRR of approximately 22% across multiple funds and investments. This indicates that a projected IRR of an angel investment that is at or above 22% would be considered a good IRR.
The biggest cost associated with the decision to become a CFA is time. The CFA doesn't cost much in the way of actual dollars, just a few thousand for the entire course of study. But it takes up an enormous amount of time consisting of many hundreds and even thousands of hours of studying for each level.Project CFA