Real Options Hibiscus Golden Age "project Investment Decisions

Real option, derived from finance, was gradually applied to such fields as investment decision-making, financial management, and value assessment. Real option is the option whose underlying asset is real investment. More specially, in such economic activities as management and investment, real option refers to the possibilities of future business management and investment, and it refers to the right obtained in all kinds of ways to make decisions according to the market. Nowadays, traditional investment decision-making methods, such IRR or NPV, are main methods, which applied in real estate project analysis. Based on DCF, there are some limitations in the traditional investment decision-making methods, which can not assess longer, uncertainty, multistage real project availably. It's a sort of value to the indetermination which consists in the large-scale real project. Since real option approach is so reasonable and advantageous, limitations of traditional investment decision-making methods are made up.This paper analyses the thought which about real estate investment decision-making, under the real option theory, with a combination of theory and practice, a combination of quantitative and qualitative analysis and contrastive analysis, this dissertation has systematically introduced the characteristics, the significance and pricing model of real option approach in real estate investment decision-making and has elaborated the process of its creative use in real estate investment.This paper expands with "Furong Shengshi" real estate project, analyses the real options to defer and the real options to growth. Additionally, the potential value of real option in real estate investment is explored in quantitative and qualitative perspectives. Based on the application of binary tree model, Block-Scholes model and Geske model, the paper provides a new viewpoint and a new method for decision evaluation about multistage real project investment.By means of case studies in real estate tapping, applying the pricing models of real option, we calculate real option value in the project. This paper has gone deeper by making a comparison with examples between traditional investment methods and real option approach to real estate projects. Thus, revealing that the application of real option to real estate investment decision-making is not just a simple negation of the traditional investment analyzing methods, but a breakthrough of their limitations and further development on the basis of retaining the essence of traditional investment analyzing methods.The real option method would avoid the negative consequences resulting from uncertainties and create more opportunity value, thus forming new investment decision-making approach.