Research On Value Evaluation Of Animation Enterprises Based On Real Option Method

With the rapid development of the economy,the spiritual needs of people have also grown,which accelerate the rapid development of culture industries.Among them,the industry of animations has grown rapidly as a newly rising one.The acceptance from the audiences toward animations is intensifying,while the government has pushed out a series of stimulating policies and confined the codes of practice.In recent year,national animations have been rising with a lot of hit works,e.g.Ne Zha took the second place in box office historically in China,which proves the unignorable potential of the industry of animations.Capitals have entered the market too,thus the valuation of animation corporations is becoming much more demanded.Most valuation reports on the public market use assetd-based valuation approach,and some of them use income approach.However,for animation corporations whose core competences are intangible assets such as copyrights,trademark rights,franchise rights,etc.,the methods mentioned above are not proper because light assets,highly intelligent capitals and high potentials bring uncertain value inflows to the corporation.At the same time,all assets have formed a connective relationship between one another,thus the accuracy of methods based on asset is not promising.The income of animation corporations is unstable,and that also depends on the preferences of audiences,thus using income approach is difficult.Besides,a vast of investments on research of original IPs is needed,and a long period will be taken before the IPs get well-known and worthy.Only using the two methods mentioned above just reflects the historical performances and is not able to value the potential performances in the future.All in all,with the growing influences of the national animations,there will be more and more investigations and mergers in the capital market,and demands for valuations of animation corporations will become unignorable,meanwhile the traditional methods are not accurate enough and the quantitative researches into it are still scarce.Thus,this paper chose the subdivision of animation corporation valuation and made conclusions on the characteristics and risks of those corporations by researching into the current situations of the industry of animations.The affecting factor for the value of animation corporations are under research and an assessment system of comprehensive abilities is built.Besides,due to the light assets,unstable management and large potential for earnings,this paper adopts the methods of real options for valuation.This paper used binary trees,cash flow and model of enterprise values,and combined them with real cases.Aiming at the feature of animation corporations,factors are chosen carefully.While considering about the value of abandon options and calculating the exit value of it,the effect that comprehensive ability of the whole corporation has on the net asset value under continued management is fully considered.Entropy-catastrophe progression methods is adopted,which revised the net asset value of animation corporations as the exit value to raise the accuracy of the model.The final result of the binary tree assessment and the result in the valuation report using the method based on the asset is compared to each other,and the former one gets a much higher appreciation rate,but this rate is compatible with the value features of animation corporations and the industrial feature of high appreciation rate.Also it accords with the rapid growth of financial performances in the future.Thus it can be said that the binary tree method is rational to some extends,and is prior to methods based on asset used in practice.The innovation point of this paper is the adoption of special industry views which helps value the unmatured area of animation corporations.In the same time,special features and value-affecting factors are analyzed and an assessment system for comprehensive abilities of animation corporations is built.Besides,this paper used binary tree models in valuation in consider of the optional characters.Value of exit options is taken into account while entropy-catastrophe progression method is used for revising it to become highly accurate.This paper also contains some demerits,because the industry is still unmatured so the number of corporations who open the data to the public is still few,and as a result the valuation methods may not be universal to every corporation,especially small ones.When the historical data amount is less,the decision of volatility is subjective,which may influence the valuations.In the future works,rational choice of volatility should be discussed.Hope the revised binary tree model could become reference for valuation of animation corporations in practice.