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The objective of the paper is description, application and verification of the real option methodology in financial decision-making of the internet company in China. There is the real option methodology described. Subsequently financial characterisation of internet Baidu company is given. Crucial part consists in calculation of the company value un...
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This chapter provides a contrast between traditional valuation methods and the new generation of valuation analytics, namely real options analysis and Monte Carlo simulation. In addition, it briefly illuminates the advantages as well as the pitfalls of using each methodology. This chapter highlights that a real options analysis is not an equation o...
Citations
... In addition, since supply chain equity financing needs to consider the influence of the market environment, price, ordering demand, revenue, and other uncertainties, supply chain equity financing is a typical stochastic optimization issue. For stochastic optimality, the existing literature has mainly researched in the fields of supply chain decision making [1][2][3][4][5][6][7][8][9][10][11][12][13], risk investment [14], and disease transmission [15][16][17] by applying stochastic process theory, generalized function analysis, and operations research methods. However, different from the existing studies, the valuation of financier enterprises by investors in the process of supply chain equity financing is inherently more complex and stochastic characteristic, which may result in larger valuation conflicts. ...
This paper explores the issue of optimal valuation of retailer equity financing based on gambling agreements in a centralized supply chain. Firstly, the betting target settings are classified into three cases: high, medium, and low. Secondly, the optimal valuation models for retailer equity financing in a centralized supply chain without and with introducing a gambling agreement are constructed separately. Finally, this paper clarifies the relationships among factors such as the betting transfer share ratio, ordering price, and optimal valuation level through simulation analysis. The results illustrate the following: (i) There is always an only optimal valuation level and optimal effort level that makes the retailer and supplier might reach an equity financing agreement. (ii) When the betting target is set too high, the betting transfer share ratio varies in the same direction as the optimal valuation level and the opposite direction as the optimal effort level. (iii) When the betting target is set moderately or too low, the betting transfer share ratio has an inverse relationship with the optimal valuation level. However, the retailer will increase its effort level at this time. (iv) In addition, the optimal valuation level is affected by the retailer’s firm growth and ordering price.
... In this line, the study by Zhang, Zhou and Zhou [65] concludes that RO analysis is more effective than NPV under conditions where uncertainty exists. The RO methodology is suitable for valuing an Internet company in China [73]. Adetunji and Owolabi [74] expound that the application of the RO approach in railway infrastructure is better than discounted flow-based models as it incorporates the value of flexibility. ...
Aquaculture is an increasingly relevant sector in the exploitation of natural resources; therefore, it is appropriate to propose various models that include the fundamental variables for its economic-financial valuation from a business point of view. The objective of this paper is to analyze different models for the valuation of investment projects in a company in the aquaculture sector in order to conclude whether there is a model that represents a better valuation. Therefore, in this study, four valuation models have been applied, three classical models (net present value, internal rate of return, and payback) and a more recent model, real options (RO) for a company producing and marketing seaweed in Galicia (region located in the northwest of Spain). The results obtained, RO (€5,527,144.04) and net present value (€5,479,659.19), conclude that the RO model estimates a higher added value by taking into account in its calculations the flexibility given by the expansion option. Future lines of research include the application of valuation models that have been applied to companies belonging to the same sector in order to compare whether the results found are similar.
