Valuation research of real options on the basis of life cycles R&D projects

Author

Peng Hong-feng ; Liu Min

Author_Institution

Sch. of Econ. & Manage., Wuhan Univ., Wuhan

fYear

2008

fDate

10-12 Sept. 2008

Firstpage

1457

Lastpage

1462

Abstract

The real options approach, which uses the concepts embedded in financial options to value non-financial investment opportunities under uncertainty, is ideally suited to value R&D projects. R&D products generally have four phases, birth, growth, maturity and decline. However, the real options approach used widely in the evaluation of R&D neglects this life cycle and so inappropriate. This paper will, based on productspsila life cycles, evaluate R&D projects by partial differential equation method and excisable quantification analysis. According to this, we expect to provide more scientific and rational decision-making guideline for R&D projects decision.

Keywords

financial management; partial differential equations; product design; product life cycle management; project management; research and development management; R&D product; R&D project; excisable quantification analysis; financial option; nonfinancial investment opportunity; partial differential equation; product life cycle; real options; valuation research; Conference management; Cost accounting; Decision making; Economic forecasting; Investments; Partial differential equations; Project management; Research and development; Research and development management; Uncertainty; R&D; life cycles; real options; valuation;

fLanguage

English

Publisher

ieee

Conference_Titel

Management Science and Engineering, 2008. ICMSE 2008. 15th Annual Conference Proceedings., International Conference on

Conference_Location

Long Beach, CA

Print_ISBN

978-1-4244-2387-3

Electronic_ISBN

978-1-4244-2388-0

Type

conf

DOI

10.1109/ICMSE.2008.4669098

Filename

4669098