How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? This book provides an exposition of a theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions. "Avinash Dixit and Robert Pindyck have successfully applied to capital budgeting the ideas and techniques of option pricing that have so enriched our understanding of financial markets."-Merton H. Miller, Nobel Laureate in Economics