Valuation of Bio-Tech Company by Venture Capital-Application of Real Options Theory

• Main Authors: Kuo Chia-Hung, 郭家宏
• Other Authors: Gong Shang-Chi
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/57047003494891562380

碩士 === 輔仁大學 === 金融研究所 === 93 === In the case of study, we investigate how venture capitalists evaluate the investment alternatives by using the real options pricing model, and help venture capitalists understand the real options value of a project. The evaluation method of real options serves a better idea for “Management Flexibility” in spite of the traditional method-NPV. This study utilized the log-transformed binomial method proposed by Tigeorgis(1991) to solve the problem of ignoring managerial flexibility in a traditional capital budgeting. We choose APEX International Clinical Research Co., Ltd. as the research object which has two options – the option to defer, and the option to expand. The study result can be summarized as follows: 1. The traditional NPV method which is no concern of any option value creates the value of NT$ 19.270 million, but the option to defer creates the value of NT$ 17.6194 million, the option to expand creates the value of NT$ 4.8664 million, and the option to defer & expand creates the value of NT$ 24.0010 million. This result indicated that NPV Model ignored the “Management Flexibility” so that it underestimates the value of an investment. 2. The interaction between the option to defer and the option to expand is positive. It means that the value of the option to defer & expand is larger than that of the option to defer plus the option to expand. 3.According to the sensitivity analysis, we found that：(1) The gross project value has positive impacts on expanded NPV and real options. (2) Risk-free rate has negative impacts on expanded NPV and real options. (3) Volatility has positive impacts on expanded NPV and real options. (4) Growth rate has positive impacts on expanded NPV and real options. (5) The period of growth rate has positive impacts on expanded NPV and real options.