Applied Research Of Real Options Model In The Assessment Of The Value Of Internet Companies

As the rise of the world’s Internet industry in the mid-1990s, after just ten years ofdevelopment, the power of their play has and will further profoundly change the way peoplework, live, entertaining way. However, how do we assess the value of Internet companiesexactly? Since Internet companies generated, this issue has been plaguing people. Modigliani&Miller (1963) established a discounted cash flow model for the modern enterprise valuationtheory, which laid the theoretical core and technical framework. Because the discounted cashflow method is simple and practical, the most widely used, the theory is the most robustenterprise evaluation method. However, as Internet companies as a typical representative ofthe emerging industry of high-tech, talent and R&D needs, the inevitable has characteristicsof high-risk, high-return, high uncertainty, to estimate the future cash flows might bediscrepancies.As bottlenecks encountered in traditional evaluation method, the method of real optiontheory for Internet companies to value assessment of the typical representatives of emergingindustry provides a new way. Real option theory, give full consideration to the enterprise invarious investment opportunities and the value of management flexibility, is a leap ofenterprise value assessment theory, also provides the necessary for value assessment theory.The real options theory give full consideration to the value of flexibility in the investmentactivities, is a great leap forward in the investment decision theory method provides thenecessary complement for the theory of value assessment. In the study of real option theory,overseas has a lot of theoretical and empirical work, and value assessment system is notperfect in our country, the temporary reference, introduction, and internalization stage.Highand new technology industries, however, especially in our country the development of theInternet companies ascendant, looking for appropriate evaluation methods for the industry, nomatter the business itself or for the standardization of the share price of ups and downs oflisted companies is particularly necessary.This article first to the enterprise value evaluation, real options theory method to carry onthe overall review, review the limitations of traditional enterprise value assessment theory andthe application of real option theory to the Internet enterprise value evaluation of applicabilityand rationality. Variance analysis of Internet industry and traditional industry, points out thatthe real option characteristic of the Internet companies and containing common real option.Black-Scholes model and its advantage are introduced in detail in this paper andassumptions, and applied to the Tencent’s enterprise value evaluation, and by extending the sample size, more persuasive conclusion, the results show that using the Black-Scholesmodel to calculate the theoretical value of the tradable shares and market prices don’t varythat much, and the market price has certain guiding significance.The study, we hope topromote the improvement and perfection of the method of valuation of the company, and lookforward to enrich our real options pricing theory research, at the same time make a usefulexploration of Chinese internet companies valuation system.