Valuation of Technology Using Real Option

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Kayyal, Kazem | 2013

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 44336 (01)
University: Sharif University of Technology
Department: Industrial Engineering
Advisor(s): Modarres Yazdi, Mohammad
Abstract:
In this study, we introduce a systematic approach for valuation of Technology development projects by applying a discrete model of real options valuation. This framework is then applied to a real technology development project. The estimate of volatility is the most important argument that it is difficult to calculate. Data from the project’s feasibility study is gathered and classified in an appropriate format to be ready for simulation. Then uncertainty parameters are identified. The data is separated and their impacts on annual cash flows are considered. Volatility of the whole project is estimated to be relatively high. This is an advantage for the proposed method. In this project, development and abandon options are introduced and valued in the proposed framework. It is then concluded that development option is valuable while abandon option is not. Finally, considering real options leads to a more appropriate estimate of the project
Keywords:
Technology ; Valuation ; Real Option Method ; Volatility ; Discrete Models ; Petrochemical Industries

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