A Study Of Real Option Method In Evaluation Of High-tech Projects

In the last lew years, the quick development of high-tech investments has attracted a lot of researchers to focus on the problem of high-tech project valuation. However, the existing tools for making high-tech investment decisions cannot properly capture the option value of such projects. The application of option pricing theory and option pricing models in pricing high-tech projects, that is, real option method, is thought to be a remarkable innovation and provide a new insight into such projects.In this paper, I first review the recent developments in the area, then I try to carry out my research in three aspects: (1) a detailed comparison of real option method and the traditional discounted cash flow method, which shows how the real option method provides a new insight into high-tech projects; (2) a general application framework for real option method, which tells a new user about the project analysis, option identification, model selection, variables and input parameters estimate and result analysis; and (3) an application of real option method in a real world business-the venture of Xiamen synactic software company, which helps to find the real option value of the company.