Study On The Declsion Model Of Energy Investment Project Based On Eeal Option

Energy is a power of human activities and the foundation of the exist and development inthe modem social. With the rapid development of Chinese economy, the demand of energyquantity increase fiercely, which makes the energy investment projects become the focus ofthe public concern. In order to avoid the blind investment, reduce the investment risk andenhance the investment's rationality, establishing a scientific method of energy investmentproject is more and more eager and important. At present, traditional evaluation methodmainly by DCF method used very common. However, this kind of method doesn't considerenergy investment project's feature, uncertainty, irreversible, and flexibility, which leads to thephenomenon that this method underestimates the project's value and people always makeincorrect decision. Consequently, this research makes a study on evaluation method of energyinvestment project based on real option and establishes a method based on binary tree theory.The results of this research are as follows:(1) Reveals the formation mechanism of the real options in the energy investmentprojects. This paper have a research on the decision process of the energy investment projects,make a analyse of the options characteristics of the projects and each option in every phase,and points out that the whole decision process of the projects is composed of all kinds ofoptions, which means that the core of the project's value is the compound options' value.(2) Establishes the evaluation method of the compound options of the energy investmentproject. Analysing the options in the projects, this paper based on binary tree theory calculateseach options' value. At the same time, according compound options calculation criteria, thispaper using FAHP method obtains every option's value coefficient ,so as to get the compoundoption value of the energy investment projects.(3)This paper applys NPV and the option method to an example separately, and gets the respective results. Through comparison, we can get a conclusion that the option methodreflects the projects' uncertainty, it's a more effective method to evaluate the project's value.