欢迎登陆 Real Options Valuation 网站
Real Option Valuation Introduction:
The Real Option Valuation template 欢迎登陆 Real Options Valuation 网站 encompasses a suite of option pricing tools to quantify the embedded strategic value for a range of proposed or existing investment scenarios. 欢迎登陆 Real Options Valuation 网站
Traditional discounted cash flow investment analysis will only accept an investment if the returns on the project exceed the hurdle rate. While this is a worthwhile exercise, it fails to consider the myriad of strategic options that are associated with many investments. This template provides the ability to identify what options might exist in your proposal and the tools to estimate the quantification of them.
Real Option Valuation Features:
- Ease and flexibility of input, with embedded help prompts.
- Informative 'Quick Start' menu for choosing the correct tool for the 欢迎登陆 Real Options Valuation 网站 situation.
- Modified Black Scholes models to value the options to delay, expand, or abandon investments.
- Automatic binomial 'tree' builder model to evaluate 欢迎登陆 Real Options Valuation 网站 complex strategic options with multiple stages. 欢迎登陆 Real Options Valuation 网站
- Nash equilibrium Game Theory model to evaluate market entry strategies in a competitive environment.
- Ability to predefine historical investment and/or industry risk profiles to utilize across models.
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Chapter 6 - Real Options and Monte Carlo Simulation versus Traditional DCF Valuation in Layman's Terms
This chapter provides a contrast between traditional valuation methods and the new generation of valuation analytics, namely real options analysis and Monte Carlo simulation. In addition, it briefly illuminates the advantages as well as the pitfalls of using each methodology. This chapter highlights that a real options analysis is not an equation or a set of equations. It is both an analytical 欢迎登陆 Real Options Valuation 网站 process and a decision analysis thought process, which leads to the second takeaway, that 50% of the value of real options is simply thinking about it. Another 25% comes from generating the models and getting the right numbers, and the remaining 25% of the value of real options is explaining the results and insights to senior management. It also provides the traditional views of valuation; value is defined as the single time-value discounted number that is representative of all future net profitability. In contrast, the market price of an asset may or may not be identical to its value.
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欢迎登陆 Real Options Valuation 网站
In this section, I post webcasts that track my semester long corporate finance class and parallel the live case study in my applied corporate finance book.
While it is nice to talk about the big picture of valuation , and I do, in my classes, it is the nuts and bolts issues that trip us up. In 欢迎登陆 Real Options Valuation 欢迎登陆 Real Options Valuation 网站 网站 this section, I will be posting webcasts that can help you navigate some of these 欢迎登陆 Real Options Valuation 网站 nuts and bolts questions.
Real Options Valuation
Real options 欢迎登陆 Real Options Valuation 网站 valuation, also often termed real options analysis, (欢迎登陆 Real Options Valuation 网站 ROV or ROA) applies option valuation techniques to 欢迎登陆 Real Options Valuation 网站 capital budgeting decisions. A real option itself, is the right — but not the obligation — to undertake certain business initiatives, such as deferring, abandoning, expanding, staging, or contracting a capital 欢迎登陆 Real Options Valuation 网站 investment project. For example, the opportunity to invest 欢迎登陆 Real Options Valuation 网站 in the expansion of a firm's factory, 欢迎登陆 Real Options Valuation 网站 or alternatively to sell the factory, is a 欢迎登陆 Real Options Valuation 网站 real call or put option, respectively. Real options are generally distinguished from conventional financial options 欢迎登陆 Real Options Valuation 网站 in that they are not typically traded as securities, and do not usually involve decisions on an underlying asset that is traded as a financial security.
Real options analysis, as a discipline, extends from its application in corporate finance, 欢迎登陆 Real Options Valuation 网站 to decision making under uncertainty in general, adapting the techniques developed for financial options to "real-life" decisions. For example, R&D managers can use Real Options Valuation to help them allocate their R&D budget among diverse projects; a non business example might be the decision to join 欢迎登陆 Real Options Valuation 网站 the work force, or rather, to forgo several years of income to attend graduate school. It thus forces decision makers to be explicit about the assumptions underlying their projections, and for 欢迎登陆 Real Options Valuation 网站 this reason ROV is increasingly employed as a tool in business strategy formulation.
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