  We introduce a general decision tree framework to value an option to
invest/divest in a project, focusing on the model risk inherent in the
assumptions made by standard real option valuation methods. We examine how real
option values depend on the dynamics of project value and investment costs, the
frequency of exercise opportunities, the size of the project relative to
initial wealth, the investor's risk tolerance (and how it changes with wealth)
and several other choices about model structure. For instance, contrary to
stylized facts from previous literature, real option values can actually
decrease with the volatility of the underlying project value and increase with
investment costs.
