Research On Application Of Real Option Method In Project Investment Decision Of Y Company

With the increasing level of economic development and openness of economic policies,enterprises,as the main body of the national economy,are confronted with increasing competition,complexity and uncertainty of the operating environment,so the investment and management activities of enterprises are increasingly affected by various external emergencies and uncontrollable factors.For enterprise's investment project with long terms and high uncertainty,the traditional investment decision analysis methods(such as the NPV method)have been unable to make accurate judgment on the value of project investments,because the traditional methods lack a correct understanding of the value of management flexibility and the potential strategic value of the project.It is against such a realistic background that the real options approach emerged as a valuation method that includes various invisible values,which fully embodies the advantages of handling uncertainties and flexibility in corporate investment projects,and it is an important expansion and improvement of traditional investment decision-making methods.At first,this article introduces the theoretical and practical significance of the application of real options to enterprise project investment decisions.And it introduces the existing research on real options theory and application methods at home and abroad,and briefly explains the concept,classification,characteristics and two major pricing models of real options.Then,based on the analysis of Y company's development background and project investment background,it analyzes the type of real options included in Y company's project investment.By applying the traditional NPV method and real option method respectively in the project,then analyzes and compares the project value obtained by the two methods,and demonstrate the advantages of the real option method in project investment decision analysis.Finally,this paper puts forward some thoughts on the application of the real option method in reality,and puts forward some suggestions on how to strengthen the enterprise investment decision-making system.This article summarizes the theory of real options,and conducts specific project applications.It can be concluded that the real option method has advantages in the investment decision-making of the enterprise project,and can more reflect the true value of the project more reasonable and accurate.