A Case Study Of BW Company's Enterprise Value Evaluation Based On Real Option Method

The driving force of economic growth is turning to innovation driven and vitality from investment . Small and medium-sized enterprises has already attracted the attention of the investors and capital market because of its remarkable innovation ability, vitality and occupation of market segments. On the premise that acquisition is grow in small and medium enterprises, it is necessary to assess the value of them.Managers and investors need the accurate value of the enterprise to make specific decisions. There are more and more discussions and studys about enterprise value assessment particularly about the evaluating method. Many of small and medium-sized enterprises may not apply traditional evaluation methods, and the new evaluation method is a good choice. The application of real option method which is one of the evaluation methods is more and more widely and it can be expected that the real option method is feasibleThis paper takes the BW company who attract strategic investors of G company in Hongkong to merger financing for example and use the real option method to assess the business value of BW company. One part of the paper described the case of BW,include company profiles, financial data and evaluation background. Another part analyzed the case of BW enterprise value evaluation, firstly introduced the related theory include cost method and real option method and analyzed their applicability in this case. Secondly,list the evaluation phases,process and results using cost method and real option method. When using the real option method, the evaluation process includes collection and analysis of BW company's financial data, determining the evaluation model and the parameters to complete the evaluation process. Finally,comparing the result with the two methods and analyzing the conclusion.The evaluation result of using the real option method shows the great differences with the cost method, but close to the G company's actual investment. The conclusion indicates that the real option method is more practical. This paper proved the correctness and application value of the real option method to provide guidance for the enterprise value assessment in the future.