Valuation of Mining Operation with Uncertainty and the Power of Waiting – A Real Option Method

2014 ◽  
pp. 1503-1512 ◽  
Author(s):  
Kuangyuan Zhang ◽  
Antonio Nieto ◽  
Andrew Kleit
Keyword(s):  
Real Option ◽  
Mining Operation ◽  
Real Option Method

Research on the Real Options in Investment Decision of Waterway Infrastructure Construction

2013 ◽  
Vol 734-737 ◽  
pp. 1617-1620
Author(s):  
Wei Jin
Keyword(s):  
Real Options ◽  
Carbon Dioxide Emissions ◽  
Capital Investment ◽  
Real Option ◽  
Investment Decision ◽  
Energy Utilization ◽  
Real Options Theory ◽  
The Real ◽  
The Government ◽  
Real Option Method

Developing the waterway infrastructure construction can improve the efficiency of energy utilization, reduce the energy consumption intensity and carbon dioxide emissions. Till the year 2020, China plan to complete 19,000 kilometers high grade channel. Construction of water infrastructure construction requires a large capital investment. However, the main financial source of funding the construction of transportation infrastructure at present in China is special financial allocation of the government. The unitary financing structure as well as the funding pressure has leaded to some serious financing problems. This paper applied the real options theory to the waterway infrastructure construction financing, analyzed the limitations of the NPV method and the advantages of real option method in investment decision of waterway infrastructure construction, and took an example to show its feasibility.

Valuation of a Troubled Firm: A Case Study on Jet Airways

2014 ◽  
Vol 1 (2) ◽  
Author(s):  
Anjala Kalsie
Keyword(s):  
Real Option ◽  
Market Price ◽  
Discounted Cash Flow ◽  
Book Value ◽  
The Real ◽  
Real Option Approach ◽  
Indian Firm ◽  
Real Option Method ◽  
Discounted Cash Flow Method

The objective in the paper is to value a firm in distress which is struggling to survive and continue its operations, unable to meet its debt obligations, and making losses so that it has a negative book value. The paper has taken a listed Indian firm which is in operation since a decade called Jet Airways. The paper looks at different methods to value this company, the most prominent being the real option approach to valuation. Finally, a comparison of different valuation methods was done with the real company price. The Discounted Cash Flow method tends to overvalue the price of a distressed firm. Real option method gives us a much smaller intrinsic price which is even close to the market price of the share.

scholarly journals An Assessment of Wind Farm Construction Efficiency Using the Real Option Method

2016 ◽  
Vol 16 (2) ◽  
pp. 84-102
Author(s):  
Tomasz Łukaszewski ◽  
Wojciech Głoćko
Keyword(s):  
Wind Farm ◽  
Real Option ◽  
Investment Decision ◽  
Investment Project ◽  
Point Of View ◽  
Practical Application ◽  
Real Option Method ◽  
Construction Efficiency ◽  
Selection Of ◽  
Made In

Abstract From a developer’s point of view the construction of a wind farm in Poland is an investment project assessed in terms of economic efficiency. This paper discusses the selection of methods to be used for the assessment of such investments: it proposes to consider wind farm construction as an option and price it using models developed for the financial market. The purpose of the paper is to present a practical application of the option pricing method to the assessment of wind farm construction efficiency, in particular to compare the option and discount methods. Calculations are based with the example of an actual wind farm completed by one of the authors. The values of the project are different depending on the chosen method of estimation. The pricing carried out using the options method will lend legitimacy to the DCF result or suggest the verification of its correctness and review of the assumptions made. In both cases the application of the options method will have an advantageous impact on the investment decision.

scholarly journals Uma Aplicação de Opções Reais na Avaliação de Licença de Prestação de Serviços de Telefonia Móvel 3G no Brasil

2010 ◽  
Vol 8 (3) ◽  
pp. 329
Author(s):  
Rafael Stille ◽  
Celso Funcia Lemme ◽  
Luiz Eduardo Teixeira Brandão
Keyword(s):  
Decision Making ◽  
Real Option ◽  
Telecommunications Industry ◽  
Decision Making Process ◽  
Discounted Cash Flow ◽  
The Real ◽  
Real Options Approach ◽  
Mobile Phone System ◽  
Real Option Method ◽  
3G Mobile Phone

We analyze the contributions of the real option method to the decision making process in the telecommunications industry. We study the case of a public auction purchase of the license to operate a 3G mobile phone system in Brazil. The results indicate that the embedded flexibilities increase the value of the project by 64% in relative to the discounted cash flow method, which could justify the high premiums paid by the winning firms, which are incompatible with the value obtained from traditional methods of analysis. This suggests that the real options approach used, which can be easily replicated and is fairly intuitive, can be a useful tool to support the decision making process of these firms.

In-Fusion, Inc.

2017 ◽  
pp. 1-4
Author(s):  
Susan Chaplinsky
Keyword(s):  
Venture Capital ◽  
Cash Flow ◽  
Real Option ◽  
Early Stage ◽  
Technical Note ◽  
Option Valuation ◽  
Discounted Cash Flow ◽  
The Real ◽  
Biotech Company ◽  
Real Option Method

This case is designed as an introductory exercise to familiarize students with several methods used to value early-stage companies. The value of a young biotech company is compared under the venture capital (VC), discounted cash flow (DCF), and real option methods of valuation. Students are asked to value the firm under the VC and DCF methods and then compare those values to the value obtained under the real option method. It is suggested that the student spreadsheet (UVA-F-1584X) be assigned in advance of the class with instructions to have students value the firm under the VC and DCF methods. A separate worksheet in the file (which can be hidden at the instructor's discretion) provides the option valuation for later discussion purposes. A technical note, “Valuing the Early-Stage Company” (UVA-F-1471), covering the basics of the VC and DCF methods of valuation can be assigned with the case.

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