Investing in PACS using real option theory.

Frequently, traditional cost effectiveness models based on film savings and other productivity improvements indicate that an investment in PACS is difficult to justify. This paper offers a new evaluation perspective based on Real Option Theory that has been applied successfully in other industries. Other than the traditional savings centric model, it allows to account for managerial flexibility, risk, expansion opportunities, increased market share and other "intangible" key metrics. It is based on the consideration that an initial investment may create opportunities for future investments, e.g. by way of expansion. The additional value associated with such real options uncovers the embedded value of the initial investment and may often favor an investment scenario where the traditional savings based approach falls short. In the following, the valuation of a real option and its application to various PACS investment scenarios (option to wait, option to expand, option to learn) are discussed. [ABSTRACT FROM AUTHOR]