Assessment Methodology Based On The Enterprise Value Of Real Options

Enterprise valuation is a process of measuring enterprise's value under a certain assumptions with financial theories, models, methodologies, etc. The biggest contribution of the real options theory is the valuation of potential value of flexibility. This is significant to the Modern enterprises which has high uncertainty.This thesis applies risk-neutral thinking of Real Option theory into the traditional Discounted Cash Flow method, in order to discuss how to evaluate companies under uncertainty. In the process of valuation, this paper uses Monte Carlo simulation method to simulate future cash flows of the case company, and describes uncertainties it faced with stochastic processes. This paper first do the necessary to improve and simplify the Schwartz and Moon (2000, 2001) model of the cost of model parameter estimation problems, and then use the Monte Carlo numerical simulation method to simulate the FOSUNPHARMA (600196) company's enterprise value on the based of the simplify of the model .We use the matlab programming language to do the Monte Carol simulation. After 20000 simulation , we have access the Corporate Value in 2006. Then we perform the sensitivity analysis of whole value of the firm.