The Effect of Business Life Cycle on Real Option Valuation：A Case of Taiwan’s Biotechnology Companies

• Main Authors: Li-Wen Wang, 王莉雯
• Other Authors: Po-Chin Wu
• Format: Others
• Language: zh-TW
• Published: 2004
• Online Access: http://ndltd.ncl.edu.tw/handle/57445825394846100832

碩士 === 中原大學 === 國際貿易研究所 === 92 === Since the 1990’s, the most important industry in Taiwan’s economic growth has been electronic industry, including the semi-conductor industry in the early and the TFT-LCD industry in more lately. However, there may be a new emerging growth opportunity in biotechnology industry and that is also the reason for government to develop biotechnology industry actively. To support this development strategy, evaluate the value of biotechnology companies is essential. This thesis tries to evaluate the value of Taiwan’s biotechnology company by adopting real option pricing model and to prove that different business life cycle stage has its own effect on the performance of evaluating stock price. The empirical result shows that it is more suitable for the biotechnology companies in the growth stage to use real option model to evaluate their value than those in maturity stage. That is, in the process of pricing a company’s value we can’t overlook the importance of judging its business life cycle stage. By the sensitivity analysis we also find that the variables affecting the value of biotechnology companies prominently are variable cost rate, capital expenditure rate and estimated period. Manager can change these variables to improve a company’s value. Literatures evaluating the value of biotechnology or technology companies by real option pricing model all used 10 years as estimated period just like the estimated period adopted by foreign literatures. However, Taiwan’s biotechnology companies always operate in OEM or in alliance with foreign large companies, and the period that can make excess profits should less than 10 years. Based on this characteristic, this article uses 3-, 5- and 8-year estimated period to simulate firm’s value individually. The shorter the estimated period is, the smaller the estimation error is.