28.2 An alternative to the npv rule for Capital Investments Define stochastic processes for the key underlying variables and use risk- neutral valuation This approach(known as the real options approach) is likely to do a better job at valuing growth options, abandonment options, etc than NPV Options, Futures, and other Derivatives, 5th edition 2002 by John C. HullOptions, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull 28.2 An Alternative to the NPV Rule for Capital Investments • Define stochastic processes for the key underlying variables and use risk￾neutral valuation • This approach (known as the real options approach) is likely to do a better job at valuing growth options, abandonment options, etc than NPV