How Does the Binomial Model Approach the Problem of Valuing the Early Exercise Feature?

The Binomial Option Pricing Model models the underlying asset's price movement as a series of discrete up or down steps over time. At each step (node) in the price tree, the model explicitly checks whether exercising the American option early yields a higher value than holding it.

This decision-making process at every node is what allows the model to correctly value the early exercise feature.