The Research Of Real Option Methods In The Environment Project Investment Evaluation

Environmental projects generally have biggish uncertainty, and are always influenced greatly by the policy. In the process that investment mode of environmental projects changes from government's mandatory implementation to policy-oriented and market operation, there will be more unknowable. These unknown quantities bring environmental projects with uncertainty, but also give the enterprise management more flexibility and the right to choose. The management flexibility and the choosing rights are not reflected in the traditional discounted cash flow method in many cases. Because uncertainty always lead to increased requirements of higher risk return rate , it cause the value of the projects smaller .This makes the traditional discounted cash flow method become not adapting in the evaluation of environmental projects.Because of particularity of the environment project investment evaluation,using real option method can be more reasonable in assessing the value of environmental projects.In this dissertation, a combination of the quantitative analyses and qualitative analyses with the quantitative analysis as the main research method, was adopted to research on investment decision methods based on the real option theory. At first, I introduced the Real Option's basic theory, analysis the environmental projects and its characteristics, and the limitations of the traditional investment decision-making methods in environmental projects. I also demonstrate the reasonableness of real options theory in the environmental projects evaluation, and gives the evaluation framework. Then I use discrete-time model of real options to analysis and price various real options contained in environmental projects, analysis the discrete-time model and continuous-time model in the application of envissing these various real options. Following, a basic model of real opronmental projects, and gives some examples of assetion is established, and some extend types are given out. Finally, example shows that applying real option approach in environmental projects is adaptive, practical, advanced and scientific.This dissertation try to supplies a practical and effective analysis tool for investment decision-making of environment projects of our country, and it has important theoretical and practical significance.