The Application Of Real Options In Strategic Investment Decision

Today, the investment environment in which enterprises faced has a growing number of uncertainties, the traditional evaluation of the investment decision-making methods have flaws in the face of such changes seem powerless. Because traditional NPV method in the investment environment there is a huge uncertainty, not be able to correctly assess the true value of investment projects, this will often lead to strategic mistakes in decision-making enterprises, therefore it is urgent that find an evaluation and business investment decision-making method which can accurately reflect the true value of the project.Traditional investment decision-making evaluation methods, such as discounted cash flow method, has its intrinsic limitations, mainly in the following points: (1) ignore the irreversibility of capital investment; (2) ignore the value of operating flexibility; (3) There is no good solution to the discount rate; (4) ignore the competitive behavior of the impact of the project; (5) neglect investment in the strategic value.Real Option evaluation method established a dynamic, non-linear perspective, very well adapted to the uncertainty as to the characteristics of the investment environment for business flexibility and adaptability of the strategy to provide a new assessment of the solutions, Mining effective evaluation method of the traditional investment by the potential value can not be found so that the investment analysis more scientific, reasonable, traditional NPV method is an effective amendment. Therefore, it is quite necessary to explore real options in the corporate strategy in the investment decision-making application.This thesis discusses the flexibility of the best investment time of the strategic investment projects, using real option evaluation methods to determine the investment decision-makers have the option owned by the project value and using option pricing model to calculate these values in the uncertain environment. At the same time, strategic investment projects not only face the uncertainty of the market and investment decision-making has also been related to the impact of investment decision-making competitors, competition exists between the Game, making investment decisions, policy makers should also consider the project competition value impact.This thesis uses quantitative analysis and qualitative analysis of research methods, the analysis of the case with empirical study to examine the strategic value of enterprise investment projects assessment, and the main research and innovation include the following:1. Real option theory and method of study. This paper discusses in detail to the traditional NPV investment represented a reasonable evaluation method, methods such as feasibility and applicability of the method limitations and shortcomings. Explore a Real Option Approach compared with the traditional method of investment decision-making advantages of the similarities and differences between the two methods and reviewed current research in the field of research, environmental uncertainty raised in the use of physical methods of evaluating investment options meaning, in the real options and make strategic investment from the Perspective of the value of a project: static NPV value + real option.2. Real option pricing model based on the project value assessment studies. On the evaluation of investment real option pricing model and reproduction theory. BS is given the option pricing model and the model parameters of the formula changes in the value of the options, the binomial option pricing model, the theory of real options in the replication error caused and the reasons for the adjustment of option pricing model, enterprises using actual project and the empirical data analysis and research.3. Competition based on the strategic investment assessment studies. In this thesis, the combination of game theory research framework, investment in strategic decision-making enterprises in the assessment of the factors has introduced competition, competitive interaction with the flexibility and response to the strategic considerations, the value of the proposed investment projects: the project NPV value = static NPV value + real option + competitive game right impact, and to explore the general sense that business investment strategy as well as the issue of competition in the optimal timing of investment issues. Therefore, this paper using a quantitative method of competition in oligopoly markets, single-stage and two-stage enterprise investment strategy, and were considered non-competitive and competitive circumstances, under different circumstances on the two companies to assess and project the most value gifted investment strategy issues.Strategic investment decision-making is process that investment managers consider the various project-related information, adopt scientific methods of analysis, make comprehensive analysis of investment projects and choose the best course of the investment plan. In today's world, competition between enterprises in the increasingly fierce, the environment of uncertainty has increased, investment decision-making analysis with the investment environment, investment manifestations, investment flows and investment rate of the specific mode of operation of the development and continues to develop. We must, therefore, to a new way of thinking to look at the changes in the selection of a rational evaluation of the investment decision-making methods to help managers make the right investment decisions.