University of Isfahan Journal of Asset Management and Financing 2383-1189 5 2 2017 06 22 Managing Information Technology Investments with Real Options Analysis Managing Information Technology Investments with Real Options Analysis 185 200 21580 10.22108/amf.2017.21580 FA S. Somayyeh Rasouli MSc Graduate, Department of Industrial Engineering, Faculty of Engineering, Shomal University, Amol, Iran Ahmad Jafarzadeh Afshari Assistant Professor, Department of Industrial Engineering, Faculty of Engineering, Shomal University, Amol, Iran Maryam Salmani Seraji Bsc Graduate, Department of Statistics, Payam-e-Nour University, Sari Branch, Sari, Iran Journal Article 2014 06 23 Most of the organizations do not have enough knowledge about how to evaluate future investments in information technology. Most of these types of decisions are taken in management board. As a result, very few organizations have deep knowledge about the value of the funds invested in the field of information technology. In this research, investment in an ERP project considering expansion and contraction options based on real options theory is studied. The findings showed that the value estimated based on Real Options which considers flexibility in management decisions is different from the outcome of discounted cash flow method. Based on the value analysis of expansion option, current asset value is estimated 1998 million Rials for current project. If today's project is extended, the asset value will become 3086 million Rials which is much more than the asset value without imposing the right of expansion. So, imposing the right of expansion has 1088 million Rials added value. Also, imposing the right of project contraction, the estimated value is 1182 million Rials. So, project contraction is irrational. Finally, based on the evaluation of the options, a strategic road map is proposed for the one year life span of the project. Most of the organizations do not have enough knowledge about how to evaluate future investments in information technology. Most of these types of decisions are taken in management board. As a result, very few organizations have deep knowledge about the value of the funds invested in the field of information technology. In this research, investment in an ERP project considering expansion and contraction options based on real options theory is studied. The findings showed that the value estimated based on Real Options which considers flexibility in management decisions is different from the outcome of discounted cash flow method. Based on the value analysis of expansion option, current asset value is estimated 1998 million Rials for current project. If today's project is extended, the asset value will become 3086 million Rials which is much more than the asset value without imposing the right of expansion. So, imposing the right of expansion has 1088 million Rials added value. Also, imposing the right of project contraction, the estimated value is 1182 million Rials. So, project contraction is irrational. Finally, based on the evaluation of the options, a strategic road map is proposed for the one year life span of the project. https://amf.ui.ac.ir/article_21580_ec00b1a5130aa04d9adf861456d7dc59.pdf