Investment projects value as an important factor of firm value

Hodnota investičních projektů jako důležitý faktor hodnoty podniků

Hana Scholleová

Acta Oeconomica Pragensia, 2005, vol. 2005, issue 4, 40-61

Abstract: Investments projects value has a significant influence on firm value. There are a lot of methods for more precious evaluation of project value. The classic methods based on NPV have their origin in financial plan and the assumption of its precious implementation. They can not evaluate the management right to adapt it according to the future courses. It is the reason why the real options methodology based on analogy to financial options has been developed. The value of firm rights depends on the same parameters, which are inputs of NPV method. Additional important parameter is volatility as a measure of uncertainty, which increases the firm value. Real options methodology should be used especially on parallel affect of firm flexibility and surrounding volatility. The best benefits these methods bring when NPV is near to zero. The main areas of their utilisation are risk and developing projects especially in the branch of power engineering, communications and biotechnology.

Keywords: investment; flexibility; volatility; real options; project value (search for similar items in EconPapers)
Date: 2005
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DOI: 10.18267/j.aop.204

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