The Application Of Real Options Method In Dongjiang Company Acquisition

Now in the process of economic globalization, the enterprise’s expansion and capital operation become much stronger. How to confirm pricing of target enterprises has already been the key to determine success or failure of merger and acquisition.However, due to uncertainty of investment, with traditional methods of enterprises, it makes target value more or less, which leads to decision-making errors of investment.And the reason is mainly because values of real options involved in merger and acquisition, but has been ignored. Thus it is necessary to introduce real option. In order to make evaluation results much closer to true value, the paper will introduce pricing theory of real option, furthermore, improve theory system of our country enterprise mergers and acquisitions valuation.At first, the article introduces the background and significance of this study, then states investigation statue of domestic and abroad, furthermore, with analysis of traditional enterprise value assessment theory, point out its limitation. It proves how important it is to introduce real option. At the same time, introduce the real option concept and models.Secondly, with a case to analyze and prove. To analyze mergers and acquisitions background, financial data and strategy of real option. Through the combination of the real option pricing method and net assets valuation method, to analyze the result of real option value, further more proves the validity and reliability of real option value.Finally, it illustrates the present situation existing problems of the real option pricing method in our country, and put forward relevant suggestions.The paper states that in mergers and acquisitions, the value of target enterprise mainly includes two parts: the value of the target company itself and real option values. For the former we can use the traditional evaluating methods such as market method, discounted cash flow method and so on, and for the latter, we need to introduce real option thinking to make evaluations, to make result more accurate. In addition, it also emphasizes real options method in enterprise’s value evaluation is not best method, but should bed combine with other enterprise evaluation methods to get a more accurate evaluation result.