The Real-option Theory And It's Application In City Sewage BOT Project

With the development of society and economy of China, the government enforces the administration to city sewage. Due to the support of the policies, the BOT mode becomes the orientation of city sewage project, and presents huge investment opportunity. What' s more, city sewage BOT project' s scale is huge, it' s period is long, and it commonly is divided into several stages. But traditional NPV method ignores the flexibility of the project, so it is unsuitable to assess this kind of uncertain project. The real option theory is new-emerging decision-making method. It has outstanding advantage in assessment of uncertain project. So under this background it is meaningful to study how to apply the real-option theory to city sewage BOT project.This paper is divided into six chapters, and comprises three parts. Such as follows:The first part: the first part comprises the first chapter and the second chapter. It belongs to the piece of investment decision-making theory. This piece completely expatiates with the traditional investment decision-making methods and the real-option theory, comprising the main contents and the process of application. By contrast with NPV method, the piece shows the advantage of the real-option in project assessment.The second part: the second part comprises the third part and the forth part. It belongs to the piece of analysis of city sewage BOT project' s real-option characters. This piece objectively analyzes the real-option characters of city sewage BOT project. And based on B—S pricing mode, the paper sets up the applicable real-option assessment mode, which consists of single stage and multistage option pricing modes. At last the paper deeply studies the parameters in the mode.The third part: the third part comprises the fifth chapter and the sixth chapter. It belongs to the piece of application in an example. In this piece, the paper analyzes an example which the writer has gone in for with the real-option method. And the paper also contrasts it witn NPV method. What' s more, the sensitivity of each parameter is studied deeply. At last the paper shows the questions we should pay attention to in the process of application.