The Research Of Investment Evaluation Method Based On The Real-Option Theory

The insufficiency of traditional DCF method emerged increasingly on the problem of business opportunity evaluation with high uncertainty. In this case, the real-option evaluation method invented as the time required, and people paid great attention on this theory during recent years.Many business opportunities can be seen option investment from the point of real-option theory. Very high option value embedded in these opportunities besides the static NPV value. The insufficient understanding of these embedded option value leads the underestimation of business opportunities and slows down the development of economy. The option method is not only the innovation of methodology but also the creative development of investment mind.After the review of former studies, this paper analyzed the application of real-option method on the problem of investment evaluation from both theory and practice sides. This paper improved decision-maker's manner of thinking through real-option theory.There are two original innovative points in this paper. Firstly, this paper developed a new investment evaluation method based on the real-option theory. Secondly, this paper analyzed the strategy cooperation between China Mobile Inc. and Tencent Inc. in the end of 2006.From the point of theory study, this paper developed a brand new real-option evaluation method, including option characteristic analyzing, option identification and option value calculation.From the point of practice, this paper put the real-option method into practice. On one hand, this paper proved the validity of real-option method; on the other hand, this paper supplied instructing for the application of real-option method in a real world.