Valuation High_Tech Start up Projects with Real Options Method (Polymer Industry Case Study)

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Saadatnia, Ali Akbar | 2009

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Type of Document: M.Sc. Thesis
Language: Farsi
Document No: 39381 (44)
University: Sharif University of Technology
Department: Management & Economics
Advisor(s): Zamani, Shiva; KeyMaram, Farid
Abstract:
The Real Option Theory (ROT) offers a modern methodology for the valuation of an investment project because it considers the value of managerial flexibility facing project uncertainties. The present work seeks to study the Expand and Swich options value for a polymer plant investment project. Perhaps the most critical step of ROT is the estimation of the project volatility. This work also makes an effort to estimate the project volatility in different cases considering different possibilities of modeling the uncertain variables. The main uncertain variables that can positively affect the project value are the price of the raw material, the price of the product and the demand growth of the product. Base on econometrics tests uncertainties follow Brownian Geometric Motion (BGM). A base model was selected for the project volatility and then the value of the Expand and Swich option was calculated through numerical approximations of the Binomial tree method
Keywords:
Flexibility ; Uncertainty ; Real Option Valuation (ROV)