Abstract
Abstract Manufacturing companies are confronted with rapid developments of computer-aided technologies as well as substantial changes in market and economic conditions. Investments in advanced manufacturing technologies (AMT) are, therefore, highly forward-looking. On the one hand the possibilities of later integration of constituent projects must be considered, on the other hand fluctuating market conditions have to be taken into account. An incremental approach toward the introduction of AMT offers more flexibility within the decisionmaking process, but the value of this managerial flexibility is difficult to measure. Traditional discounted cashflow techniques for the economic evaluation of investments cannot properly reckon with the opportunity of conditional investment making dependent on future market developments. Option analysis provides an answer to this issue by creating an analogy between the valuation of options on shares and serial investment planning. In this paper, option analysis is applied...
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