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The Applications Of Real Option In The Project Evaluation Of Venture Capital

Posted on:2004-05-15Degree:MasterType:Thesis
Country:ChinaCandidate:X L TongFull Text:PDF
GTID:2156360125963319Subject:Technical Economics and Management
Abstract/Summary:PDF Full Text Request
Venture capital is a mew-type of investment, it attracts much attention of investor and scholars. As a new-type system of investment and finance, the most obvious characteristics are a high risk and a high benefit. It is not doubt there is tremendous risk. The project choice and the project evaluation are important processes of venture capital. Therefore, to select scientific methods for project evaluation of venture capital, is the goal of the paper.Because venture capital is not similar with traditional investment, traditional methods of project evaluation are not unsuitable to venture capital. The traditional methods often are based on Discount Cash Flow Method(DCF). But there is a most serious drawback that they don't consider the management's flexibility. Based on studies at home and abroad, a new evaluation method is advanced in the light of the features of venture capital. In order to improve the traditional method, the article quotes real option method, and applies Black-Scholes pricing model and binomial tree pricing model to evaluate venture project.The paper is based on venture capital of TianQi Group, so it introduces some knowledge about venture capital. It includes five chapters. The first chapter is the summary about venture capital, which includes the process, the methods of venture and the traditional systems of project select. The second chapter is the crucial part of the paper, it definitely introduces the methods of real option and their implications. The third chapter discusses how to use the methods if the goods price of the venture capital is changeable. The fourth chapter gives a case that based on TianQi Group, in order to demonstrate how the models are applied in making investment decisions. At the same time, their results compare to that of traditional project evaluation. At the end of this paper the way and suggestions are given to domestic venture capital.
Keywords/Search Tags:Venture capital, Project evaluation, Real option, Option pricing, Black-Scholar pricing model, Binomial tree pricing model, Operating flexibility
PDF Full Text Request
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