Study On The Application Of Real Options In Enterprise Investment Decision-making

Life is continuing in the midst of progress, only can be understood in retrospect(Soren Kierkegaard). The changes are absolute in the preceding. Leaders must use a develop view and positive opinion to deal with many uncertainties that the enterprise encountered in development, especially in this fast development economic and information society. Traditional investment assessment and decision theory use a static view to look at the changing world. And because it neglect the investment irreversibility, time selectivity and management flexibility, so it can not be very good to deal with the problem in reality world. Real options analysis can make up for the traditional investment assessment. It can help leaders to hold uncertainty continuously and dynamically, then to choose right direction, to control a reasonable scale and to adjust the way of the investment. In this way leaders could changing their investment decisions continuously. Real options is not only a technical methods that can deal with the flexibility in an investment, but also a valuable tool that can change mentality in the traditional investment.Generally, the returns of our enterprise investment are low. In addition to the institutional factors, the backward of the investment ideas and decision method is another important factor. The paper will study how to use real options in enterprise's investment decision-making. Firstly, this paper will make the normative study of the value creation capabilities of real options when it deals with the uncertainty. Then an empirical study use to prove the usefulness of real options. And then analyze how to identify uncertainty in the process of investment decision-making, also the flexible in the management. Based on the applicability and feasibility of the real options analysis, this paper set up a framework for investment decision-making process which is suitable for the situation of Chinese enterprise. So that we can in a certain extent go beyond the complexity mathematical calculations of real options and to draw the essence of the idea, and to promote real options applied in the actual investment decision-making. With a view that the framework can improve the evaluation methods of our investment decision-making, improve the norms and methods of enterprise investment system, and improve the efficiency of business investment decision-making, to improve the operation of investment activity from the operating mechanism for micro-enterprises.