The Decision Analysis Of X Real Estate Company Land Reserve Based On Real Option Theory

As the change of market environment, the fierce competition in the industryevolution and the internal and external demand for the company’s development, thecompany decision-makers have deeply realized that simply relying on subjectivejudgment is unable to correctly guide the land reserve and development of company,and carrying on the scientific and accurate evaluation is very necessary. Traditionalevaluation methods cannot meet the calculation requirement of the current real estateproject reserves development, being a supplement to the traditional evaluation methodthat real options theory has been fully confirmed. The purpose of this thesis is to makea scientific decision and guidance for X Real Estate Company’s land reservedevelopment by using the evaluation method of real option, and the article’s mainwork is divided into three parts as followings:First, this part analyzes X property company land reserve developmentdecision-making’s environment on two aspects including X Real Estate Company’sexternal environment and internal environment factors. By using the PEST model,analysis result is that the external environment is conducive to the development of thecompany, together with analyzing the internal environment factors of the project itself,which lay the foundation for the decision making calculation in later phase.Second, this part builds the model for the land reserve developmentdecision-making of X Real Estate company. In accordance with the real optionmethod in land reserve and development decision making consistent process, this partcompletes the judgment of the category of real options, parameters calculation,building the method of model calculation in turn.Third, this part scientifically computes the land reserve development value for onecertain project of X Real Estate Company. By comparing the differences betweentraditional evaluation and real options, the article concludes that the right of delayingdeveloping land increases the value of the land reserve. The article analyzes thetiming of land reserve and development issues, gives the best probability of waitingtime and decision points. With analysis on land value of the sensitivity of variousfactors, the article shows the influence degree of various factors on the land value.Based on the above analysis and calculation, this paper obtains land reserve anddevelopment value for one certain project of X Real Estate Company, which contains delay option of value, and gives the waiting time and probability for the highest value.The article provides scientific guidance for decision making, and proves that thetheory of real option is feasibility for X Real Estate Company land reservedevelopment decisions making, which provides a new perspective for the projectdevelopment and the company’s development.