An empirical investigation using a real options analysis framework for making the optimal allocations of financial resources and application to investment decisions under uncertainty

Financial investment decision-making for projects under uncertainty is a complicated process. The interactions between individual decision-makers risk preferences and their corresponding investment allocation decisions were studied. The risk profiles and risk tolerances of this study's corporate participants were assessed and their pattern of decision making in an investment setting with distinct scenarios under uncertainty were analyzed. Those risk preference biases that arise from the individual decision-maker's propensity to assume risk and their recognition and assignment of risk are then applied to the context of financial valuation analysis.;Individual biases attributed to the interpretations and sentiments toward risk were found to significantly impact the financial valuations as well as the decision making process. This study will result in theoretical contributions regarding risk preferences and financial valuations. The treatment of any biases from risk preferences in subjective probability assignment will be dealt with through straightforward statistical techniques. The individual bias will be corrected for the participants involved in the study. The results of biased and unbiased financial valuations will be calculated and compared. It is demonstrated that a significant difference in the valuations will exist.;This study develops a method for evaluating bias so that its negative effects on project financial valuation methods may be eliminated. Investment decision-making will become more consistent and accurate as a result of the treatment of biases. This research results in financial valuations that are more consistent and accurate through the reduction of biases attributed to risk preferences and job occupation.