Assessment Study, Based On The Franchise Value Of Real Options Theory

New high-tech companies often start with pending patents on their core technology. Whether the company successfully obtains the patent often determines its future success or even its survival. The uncertainty about issuance of the patent makes the valuation of such startup businesses difficult, especially when the patent is associated with expected high growth. The modeling of patent uncertainty, together with a growth real option is often challenging.This paper uses a real option model as a framework to correctly evaluate a startup business with pending patent and associated growth real options. Real options analysis is a new approach to the evaluation of investment, investment appraisal, asset valuation that developed in conformity with the request of changing in environment in the 20^th century. Evaluation research and practice field in project pay highly attention to this new method, in order to reply the complicated and changeable economic environment today. A "real option" is simply a non-financial asset that confers the option to make future investment. It supplements traditional methods of investment appraisal.This paper mainly includes the following content. Firstly, we will give the concepts and features of patents, and reviews and comments the traditional evaluation methods. Secondly, we introduce the essential concept, basic feature and common pricing theory of real options, and analyze patent's option attribute and construct an applied frame of real options. Thirdly, on the basis of the pricing theory of real options, we give the needed differential equation suitable for patent evaluation and calculating methods. Fourthly, an illustrative example is provided, and the problem is further discussed. Finally, the work of the whole paper was briefly summarized and some future researching problems are also outlined.