Using Real Option Analysis to Evaluate the REITs
碩士 === 國立中正大學 === 高階主管碩士在職專班 === 97 === The Discounted Cash Flow (DCF) model is one of the most popular techniques to evaluate the real estate investment trust securities (REITs) in early studies. However, the DCF fails to incorporate the fact that REITs has the managerial flexibility to expand the...
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| Format: | Others |
| Language: | zh-TW |
| Published: |
2009
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| Online Access: | http://ndltd.ncl.edu.tw/handle/31060478874544615378 |
| Summary: | 碩士 === 國立中正大學 === 高階主管碩士在職專班 === 97 === The Discounted Cash Flow (DCF) model is one of the most popular techniques to evaluate the real estate investment trust securities (REITs) in early studies. However, the DCF fails to incorporate the fact that REITs has the managerial flexibility to expand their portfolios through financial leverage in the life of the asset. This paper therefore considers the Real Option Analysis (ROA) approach for REITs evaluation. Shin Kong No. 1 REIT is used as the sample case in the empirical study. The value of this evaluation result at the end of 2008 is NTD$ 13.541 per share, closing to the book value.
Results of the sensitivity analysis show that the value of REIT will increase by $0.066 per share when the expansion is 5 % of the total investment. The value will decrease by $0.109 per share when raising the risk-free interest rate by 0.25 %. $0.312 will be added when the annual rental rate increases by 5 % while $0.642 will be added when the asset value increases by 5 % in 5 years.
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