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.

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 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.

Outreach Networks: First Venture Round

2017 ◽  
pp. 1-7
Author(s):  
Susan Chaplinsky
Keyword(s):  
Venture Capital ◽  
Cash Flow ◽  
Private Equity ◽  
Early Stage ◽  
Venture Capitalist ◽  
Entrepreneurial Finance ◽  
Discounted Cash Flow ◽  
Start Up ◽  
Excel File

OutReach Networks is taught in Darden's Entrepreneurial Finance and Private Equity elective. A teaching note for this case is available for instructors as well as an Excel file for student analysis. This introductory case explores the venture capital (VC) and discounted cash flow (DCF) methods of valuing early-stage companies. OutReach Networks is an unusual start-up company in that it was profitable early in its development and did not have to seek VC funding to support its growth. The company has grown quickly and may soon be a candidate for an IPO. In November 2011, an experienced venture capitalist approaches the founder with an offer to invest $30 million in exchange for 30% of the company. While the founder sees some benefit from the VC's experience in preparing the firm for an IPO and the funding enabling it to scale more quickly, he cannot understand how the VC has arrived at this offer. The founder believes the funding should be worth no more than 15% of his firm. Potential reasons for the disagreement over the valuation are (1) differences in the founder's and investor's view of the company's risk, (2) disagreement over the appropriate set of comparable companies, and (3) differences in the methods used to calculate the percentage equity stake. The case is appropriate for use in courses covering entrepreneurial finance or venture capital.

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.

scholarly journals VALUATION OF FLEXIBLE LEASES FOR CORPORATE TENANTS FACING UNCERTAINTY IN THEIR REQUIRED WORK SPACE

2010 ◽  
Vol 14 (1) ◽  
pp. 49-72 ◽  
Author(s):  
Baabak Ashuri
Keyword(s):  
Real Option ◽  
Maximum Amount ◽  
Option Valuation ◽  
The Real ◽  
Rental Market ◽  
Work Space ◽  
Real Option Valuation ◽  
Integrated Valuation

A valuation approach is presented to price flexible leases with expansion, contraction, and/or cancelation options from the corporate tenant perspective. This model uses the real option valuation approach and determines the flexibility value or the option premium of a lease. This premium is the maximum amount of money that the tenant is willing to invest in incorporating a specific flexible feature in the leasing arrangement. Our model considers uncertainty in the rental market, as well as uncertainty about the firm's required workspace in an integrated valuation framework. Santruka Pristatomas vertinimo metodas, kaip iš komercinio nuomininko perspektyvos ikainoti lanksčiaja nuoma su galimybe didinti arba mažinti plota ir (arba) atsisakyti nuomos. Šiame modelyje, taikant realiu pasirinkimo sandoriu vertinimo metoda, nustatoma nuomos lankstumo verte arba priemoka už galimybe rinktis. Ši priemoka ‐ tai maksimali pinigu suma, kuria nuomininkas pasiruošes investuoti, idant i nuomos susitarima galetu itraukti konkretu punkta del lankstumo. Mūsu modelyje i nuomos rinkos netikruma ir i netikruma del imonei reikiamo darbo ploto atsižvelgiama taikant kompleksine vertinimo sistema.

scholarly journals Comparison of the Datar-Mathews Method and the Fuzzy Pay-Off Method through Numerical Results

2016 ◽  
Vol 2016 ◽  
pp. 1-7 ◽  
Author(s):  
Mariia Kozlova ◽  
Mikael Collan ◽  
Pasi Luukka
Keyword(s):  
Monte Carlo Simulation ◽  
Monte Carlo ◽  
Simulation Model ◽  
Real Option ◽  
Fuzzy Numbers ◽  
Numerical Results ◽  
Option Valuation ◽  
The Real ◽  
Valuation Methods ◽  
Real Option Valuation

The paper compares numerically the results from two real option valuation methods, the Datar-Mathews method and the fuzzy pay-off method. Datar-Mathews method is based on using Monte Carlo simulation within a probabilistic valuation framework, while the fuzzy pay-off method relies on modeling the real option valuation by using fuzzy numbers in a possibilistic space. The results show that real option valuation results from the two methods seem to be consistent with each other. The fuzzy pay-off method is more robust and is also usable when not enough information is available for a construction of a simulation model.

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