The Application Of The Real Options In The Investment Projects Decision And The Value Estimation

It is very often for an enterprise to evaluate and decide the investment projects. For a long time, DCF and NPV are always the most extensive analytical approaches of the investment decision. But with the change of circumstances, the uncertainness of investment projects increases and these traditional decision approaches are challenged. People start to search after new and more real decision approaches. Thus the options decision approaches which use the theory of options to evaluate the real assets and make a decision produce. But the most difficult problem of the options decision approaches lies in the value estimation of the real options. This paper mainly studies the value estimation of the real options in the investment projects evaluation and decision and combines the example to show how to make use of options decision approaches to evaluate and decide some investment projects.In the first chapter, the paper discusses the problem of the real options'value estimation in the investment projects and the change of the investment projects'future profit of S t are assumed to be satisfied the following geometric Brown motion:where r is the non-risk rate, it is equal to the bank rate of interest,...