The Rationality Of Real Options Valuation Model Applied In Pricing Of Foerign Acquisition

The assessment of corporate value in Foreign mergering domestic High-techenterprises,because of High-tech enterprise value with great uncertainty, probablylead to the valuation of assessment enlarged or narrowed.In addition, the company valuation process involves many other non-quantifiablefactors that also affect the true value of the enterprise, resulting the real optionsvaluation method may lead to a largerdeviation from the true value.Purpose of this study is to prove the rationality of real options model in theenterprise valuation by a variety of the empirical results.Rather than as many scholars at the basis of defaulting that the real optionmethod is the most reasonable means to assess the High-tech enterprise in Foreignmergers . The paper selects those High-tech companies whose M&A by foreigncapitals completed in years 2002-2006 as research samples.First, it calculated the DCF value.Then,it made out the value of real option.On this basis,it add the DCF value and option value together.So,this togethervalue is just the value of the companies assessed by the way of real options valuation.At last,This paper founds a third value as the reference system and set up twoindicators for testing the rationality of the real option model .It is concluded ,in the assessment of high-tech enterprise,the real option model isindeed superior to the free cash flow model.However, the Real Option Valuation Act does not apply to all acquisition targets.We should try to avoid the kind of corporate whose assessed value thatdiscounted by free cash flow at a higher level than the reference value, and price inthe corporate's merger agreement much lower than the reference value.Otherwise it will lead to the assessment value by real options valuation enlarged,therefore reduced the rationality of the assessment in turns .