Enterprise Value Assessment Of Real Options Pricing Analysis

Enterprise valuation is a process of measuring enterprise's value under a certainassumptions with financial theories, models, methodologies, etc. This thesis appliesrisk-neutral thinking of Real Option theory into traditional Discounted Cash Flow method,in order to discuss how to evaluate companies under uncertainty. In the process of valuation,this paper uses Monte Carlo simulation method to simulate future cash flows of the casecompany, and describes uncertainties it faced with stochastic processes. Additionally,Quasi-Monte Carlo simulation method is introduced as a substitute for efficiency and effectof simulation. This thesis simulates the case company's value based on the simplifiedSchwartz & Moon (2001) valuation model, and at last analyzes key drivers of improving itsvalue. This paper implies, Real Option theory brings forward a new systematic way ofthinking for enterprise valuation. But Real Option pricing method still cannot be a precisemeasure of enterprise valuation, because of complexities of its methodologies andtechnologies.