Investigation of the relationship between real option method and escalation of commitment in capital budgeting

The major goal of the current study is to investigate whether using the real option method along with the discounted cash flow techniques can reduce the decision-makers' escalation of commitment(EC hereafter) or their desire to keep up their commitment to a failed project.. The sample size was 50. Data were gathered via the use of questionnaries. The instrument's validity and reliability were confirmed based on the opinions of a panel of experts and Cranbach's Alpha coefficient respectivety. The results revealed that using the real option method in capital budgeting can affect the users' behavior and decisions and lead to better decision-making in the long-term projects. [Farshid Ahmadi Farsani. Investigation of the relationship between real option method and escalation of. Life Sci J 2012; 9(3):2094-2099]. (ISSN:1097-8135). http://www.lifesciencesite.com. 302