The Equity Value Of XCMT Based On Option Pricing Theory

Enterprise value evaluation is an indispensable part in modern economy, which involves integrative value evaluation and equity value evaluation. According to different understanding about constructions of asset value, there have come into being three basic evaluation theory including income approach, cost approach and market approach.This paper reviewed the actualities of traditional evaluation approach, summarized systematacially theirs application assumptions and conditions, through the example of XCMT, stated the application localizations concerns these three approach. Cost approach over-emphasize the past construction course of asset and ignore the profitability of assets. Income approach focus the predicting of future profit and value discounting which arise much dispute about evaluation results due to overmany parameters and models. Market approach is relative intuitionistic, but what make it difficult is to find comparable cases. Among the other things, traditional evaluation cannot meet the requirement of realities, especially for high-technology enterprises with high-degree uncertainty.On the basis of analyzing shortcomings of traditional evaluation approach, we could regard company equity as a compound of rights and liabilities by asset pricing theory. So real option theory and option pricing model(OPM) is introduced here. In this paper, parameters which are necessary for pricing the equity of XCMT using OPM such as present value, fluctuation ratio, executive price was worked out, then got successfully the way about pricing equity by OPM.By comparing OPM approach and traditional evaluation approach, thereal option factors of XCMT involves input on R&D, human resources capital, flexible strategy was separated. Thereby we can find that OPM consider the uncertainties which cannot be measured precisely under real options and that OPM evaluate uncertainties from the window of option. This approach may save the valuator's work time as well as verify the results under traditional evaluation approach. OPM bring us a new value evaluation way which add creditability and acceptability of evaluation result At the same time, the paper discussed the disadvantages of application OPM to evaluating enterprise equity, these factors require we consider and improve OPM approach when we use it.