Research On Highway Construction Project Valuation Base On Real Option

Highway construction has close relationship with the national economy and people's livelihood. Project value has long been estimated by method based on NPV method.The premise of NPV are: Net cash flow and risk discount rate can be assessed exactly during the project life cycle. But on practical projects ,there is some difficult nondeterminacy including: the term , the stage of investment etc. Projects valuation always deviates from its real one according to the tradition method.Actually these nondeterminacy is reckoned as valuable factors.Based on the above situation,the aim of the paper is to establish a proper modle, from real option angle, to fix the problem of highway construction value assessment.In the paper,real option method is used on the value of highway construction assessment , which aims to better estimate projects value and provides theory reference for further research. The proposed model being used in specific cases, in the actual problem for later how to use real options valuation method provides reference. Through real option theory is introduced to highway asset value evaluation, helping investors more comprehensive view about opportunities and risks, increase the opportunity of obtaining higher earnings, realizing the optimal allocation of social resources, and other industry using real options valuation method as a sample. On the back of the country drive economic growth via infrastructure construction, to using a real option valuations methods to solve the actual problem in China is more important significance.The paper firstly does normative research on related articles home and abroad,bringing forth the research direction.In chapter two,we discuss the difficulties in real option assessment.In chapter three, we compare the tradition assessment method and real option method ,combined with the feature of highway construction.Finally we select the Black-Scholes modle as the base method .In chapter four, analysising the real asset features to creat an advanced assessment modle .In chapter five,the paper selects the project of TanHeng highway construction as a case study based on advanced value assessment modle and sensitivity factors analysis to compare the tradition DCF method and the paper selected one .According to the demonstration , real option vale assessment method is a better way in the project which contain a lot of nondeterminacy and uncertainty.This paper innovation points is: firstly Using the perspective of a real options to evaluate highway construction project, avoid the disadvantages of the traditional valuation method. Secondly it is considering project in reality include value of leaks, inspired by financial option pricing model in payment of dividends, draw a value leakage rate of solution. Meanwhile introducing expected cash flow logarithmic fluctuation method make the model parameter dynamic, establish real options valuation model based on the value of the leaks of project, more actual problems need, as a model innovation.In the end, points out the limitation of the paper and the direction of further research.