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The article looks at a study by the Institute of Management Accountants (IMA) on financial investment decision making in the motion picture industry, focusing on the real options method of project analysis. A real options approach to capital investment is compared with a discounted cash flow (DCF) model. Topics discussed include the value of motion picture sequels, film advertising spending, and real options use in other sectors such as the pharmaceutical, paper, or construction industries.

In this article the author discusses the advantages of using the discounted cash flow business valuation method. He notes that the number one advantage of this method is its simplicity, adding that in business the simple approaches are often overlooked. He asserts that this method works best for small to mid-sized nonpublic companies. He discusses how by using a combination of prior cash flow statements, tax returns, and business and economic assumptions you can predict future cash flows and yield solid valuations. He also provides a four-step process that walks the reader through the process and teaches them to make their own valuations.

The article reports that three new booklets are available from the Professional Accountants in Business (PAIB) Committee of the International Federation of Accountants (IFAC). "The Crucial Roles of Professional Accountants in Business in Mid-Sized Enterprises," "Preface to IFAC's International Good Practice Guidance," and "Project Appraisal Using Discounted Cash Flow" are available at the IFAC online bookstore.

The article discusses real options analysis for valuations of corporate finances. The article comments that the discounted-cash-flow (DCF) approach and the net-present-value (NPV) method undervalue assets and potential projects. The benefits of using real options analysis when considering small, potentially high growth companies and any internal company project is discussed. Resources for real options analysis are provided.