Application Of Real Option On Investment And Financing Decision

This text introduces the famous method of Real Option to solve the problem of the changeable management environment and uncertainty of decision in investment and financing of companies, for the complicated economic activity and fierce competition needs more accurate decision.The investment decision is one of the most important components of the company financial decision. The complicated economic activity and the fierce competition at home and abroad have brought forward higher request to uncertainty in investing and flexibility administration. The traditional method of Net Present Value seems to be difficult to adapt to new need. First, the text analyses the characteristic and application of the different types of Real Option, which can improve the accuracy of decision. Then concerned with the Game viewpoint, Real Option method is gone deep into to face competitors condition investment decision analysis, the problem having discussed the decision of the leader, follower and coordination invest under double-end monopolistic competition specially. Lastly, the different environment of competition that the companies face is contacted with Real Option under different stage of investment.The financing activity is one of the most important financing activities of companies. This text tries to provide a new approach and train in financing risk control and company capital structure model with Real Option concept. Firstly, the text analyses the financing character of company under the view of Real Option, revealing the economy relation with Real Option character between the company, shareholder and the creditor. Then we use Real Option viewpoint to analyze the risk of financing, further pointing out the approach that financing risk control by Real Option method. Lastly, The text brings forward a new method to optimize the capital structure.Applying Real Option method in the financing decision not only riches the means of company decision, but also provides a new idea of making policy. This text treats Real Option as an important financial analysis implement and financial analysis concept. With the fierce competition between companies and the mature of domestic capital market, the Real Option method will certainly arouse more enterprise decision-makers, and be able to have more and more strong adaptability and practicality thereby.