Investments in flexibility


  • Maria Hedvall

Publish date: 2008-10-27

Report number: FOI-R--2579--SE

Pages: 78

Written in: Swedish


  • capital budgeting
  • flexibility
  • risk
  • uncertainty
  • investment processes


To adapt to changing conditions, organisations can make different sorts of investments. They can make investments in research and development, in flexible equipment, and they can defer investments as a means to accommodate. This report focus on two commercial firms and three military authorities: their investment processes and calculations as well as their handling of uncertainties. The results indicate that the military authorities don´t have the standardised and homogenous procedures used by the commercial firms. The results also indicate that the commercial firms use Net Present Value in order to estimate the value of an investment, and that they don´t calculate asymmetric uncertainties separately.