Real options valuation of eBusiness
Author(s)
Tan, Enk Ee, 1968-
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Sloan School of Management.
Advisor
Jiang Wang.
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Traditional funding criteria like return on investment (ROI) and net present value (NPV) do not work well with most eBusiness. These corporate budgeting techniques were designed for relatively slow progressing or well-established business models. The Internet marketplace is constantly being redefined and most of these projects have a high velocity of evolution and uncertainty. Firms and investors have yet to possess systematic and quantitative financial evaluation tools. After studying the behavior of Internet firm valuations and exhaustively investigating the conventional ways of valuing an eBusiness, this paper finds that real options valuation is an extremely useful analytical tool for valuing eBusiness projects from the management's perspective. It provides management a powerful extension of the traditional cash flow budgeting models, and a structure to attach and quantify strategies. Real options valuation in its current form, however, is not entirely suitable for the use as a valuation tool for traded stocks.
Description
Thesis (M.B.A.)--Massachusetts Institute of Technology, Sloan School of Management, 2000. Includes bibliographical references.
Date issued
2000Department
Sloan School of ManagementPublisher
Massachusetts Institute of Technology
Keywords
Sloan School of Management.