The Valuation Analysis Of PV Companies Based On Real Options

ABSTRACT: U.S subprime mortgage crisis caused a profound impacton national economies, particularly the impact of the crisis to the solarphotovoltaic industry is particularly great, even causing PV industryglobal patterns of change, and China PV industry on exports as the maindirection has had a disastrous effect. China PV mergers, restructuring oreven a bankruptcy liquidation are inevitable, mainly due to thephotovoltaic industry still has a strong policy influence, requiring theState strongly support, while China’s PV industry is lack of policies tohelp. For domestic PV manufacturers in China will be faced with shocks,proposed photovoltaic business valuation.First of all, based on analyzing the deficiencies of income approachand other traditional business valuation methods, this paper proposes thereal options approach. The Real options approach reasonably assesses thevalue of the future business opportunities, mainly reflected in the R&Dinvestment and project construction. Therefore, the enterprise valuationframework included in the real options approach comprehensivelyassesses the enterprise value. PV industry belonging to the high-techindustry, particularly PV companies face bigger risks, so traditionalbusiness valuation methods are not suitable for photovoltaic businessevaluation and therefore made up application of the real option pricing method. This article combined with the actual situation of China PVcompanies and analysis of the characteristics of domestic PVmanufacturers, using real options method for PV companies on the basisof this analysis to the evaluation, in particular, analysis of real optionpricing model using, exploring how to apply real option pricing model inthe PV business valuation. This article on the application of real optionpricing model has case studies, discussion of real option pricing modelapplied to the applicability of the photovoltaic business, value assessmentof PV enterprises is of great significance. In short, this departure from thetraditional business valuation method, by analyzing the shortcomings oftraditional business valuation method, we proposed application of realoption pricing, and provide case studies.