VALUING INFORMATION - As an extension on the option to defer

Abstract

Our purpose with this study is to show how information can be valued, as an extension on the option to defer. By using EVPI (Expected Value of Perfect Information) when valuing information, we have developed a framework that can be used when performing valuation on different investment situations. The study will be performed containing the qualitative method, although the study contains mathematical formulas, a bigger weight of the study for reaching its goal lies in the detailed explanaition on how the two methods can interact and what it means. Our results indicates that the use of the framework presented is more suitible than the use of only the traditional DCF-method (Discounted Cash Flow-method), though, readers must be aware of different hurdles that can arise, e.g., that the user of the invesment method does not fully understand the concept of the situation contra method used. By using the framework, financial experts and decision makers receive more foundations to make efficient decisions concerning different investment situations. Though, they have to be aware of that the probabilities calculated are no garanties that future events really are going to occur.