Real Options Theory And Its Application In The Investment Decision-making In The Study

Investment decision-making is a substantial portion of enterprise finance management. Nowadays, with the improvement of technology and exacerbation of competition enterprises are facing much more uncertainties. Consequently investment projects have to bear more risk. It is becoming a hot subject on how to control risk and evaluate the projects correctly. Traditional methods of evaluation concern the risk and profit in the static prospect ignoring the management flexibility in the whole process, such as abandon switclu expanding investment ,in this way it can't get a correct result .This paper introduce option into the investment areas, taking the flexibility in the investment process as an option, and form the concept of real options .This paper outspreads in both theoretical aspect and method aspect. From theory, this thesis offers a new real options analysis frame based on integration of the real option theory research of these days. From method, we have applied the financial option models to evaluate the real-options existing in real investment projects, we focus on exercising the existing models and analyze what shortcomings are there when we do so .After that, we offer a new model to evaluate the switch options improved on option pricing theory, in this empirical research ,we replace labour force cost with daily wages. It's my purpose to offer managers a new way to enhance their investment value through an empirical analysis.