Estimating the Value of the Option to Expand an Investment Project
Originally published: 05/07/2016 09:01
Publication number: ELQ-32788-1
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Estimating the Value of the Option to Expand an Investment Project

This program calculates the value of an expansion option in an investment analysis

The user has to define the following inputs to the model:
1. Present value of expansino potential
2. Annualized standard deviation
3. Initial investment needed for expansion option
4. Number of years you have rights to project
5. Costs associated with waiting an extra year to expand
6. The riskless rate that corresponds to the option lifetime

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (

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Further information

- Value of option to expand

Effective tool for quantitatively evaluating an expansion option in investment analysis


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  • Hafizal Aziz(last updated: 26/02/2020 01:16)
  • Valeri Mirchev(last updated: 01/12/2019 14:21)

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