8/3/2023 0 Comments Real options valuationThe developed company valuation model shows how the valuation of strategic Real-Options and a DCF valuation of a company's operational activities could be integrated. Important step forward for Real-Options theory. Broad recognition of decision analysis can be an option-pricing methods, but also decision analysis. There are several methods to incorporate Real-Options value,Į.g. We found that Real-Options are more than rights on a company's traded assets and that Real-Options theory represent an important tool to value flexibility, not only to value flexibility in operational activities,īut also to value strategic opportunities. A real case, acquired from PhiDelphi, was used to demonstrate our concept and to find out and show to what level of detail we are able to operationalise our (generalised) model. After an evaluation, we chose to operationalise the bottom-up valuation of short-term strategic These two analyses led to several functions of Real-Options theory that were worth This potential to functions that could improve a DCF valuation of a company, we analysed the enterpriseĭCF model as well. By performing an extensive literature search, which started with critically reviewing the fundamentals of Real-Options theory, we attempted to identify the true potential of Real-Options theory. Basically, the Real-Options literature is divided into two camps, proponents and opponents. Incorporating the value of Real-Options into the valuation of a company. Thereby, we deliver both a theory and a model for This research's objective is to determine when and how Real-Options theory could be applied to improve the valuation of companies and how this information can be used to modify the enterprise DCF model. However, both approaches could be complementary. Unfortunately, the current debate is not focused on how Real-Options could improve the overall company valuation, but tends to focus on the shortcomings of either a DCF analysis or a Real-Options approach. To many, Real-Options have the possibility to improve all sorts of capital budgeting decisions, aligning financial analyses with strategic analyses, by taking futureĮxibility into account. Since Myers (1977) coined the term "Real-Options", literature in this field has been booming. A Real-Options approach to company valuation.
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