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Title: Real options in corporate valuation
Author: Vrana, Eleftheria
ISNI:       0000 0004 2737 6438
Awarding Body: Imperial College London
Current Institution: Imperial College London
Date of Award: 2008
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This thesis considers corporate real options in the consumer goods sector, held by brand-based firms. Particular sector applications have been considered in the real options literature depending on the sophistication of the capital budgeting process followed by firms in that sector, and other criteria, such as the tradability of assets or end-products and the fraction of equity value attributable to growth options versus current cash flow generation. These criteria are not sufficiently met in the consumer goods sector, and hence literature in this area has been limited. All the same, there are numerous real options embedded in brand-based consumer goods firms, reflecting the opportunities to develop their business, achieve operating efficiencies and enhance their strategic position through acquisitions and disposals. Recognising these options can lead to more efficient allocation of resources and improved estimation of the firm's intangible value. Moreover, it can assist negotiations regarding the structuring of contracts that restrict, or enhance, the firm's flexibility. In this thesis we consider three types of options; namely, the option to extend the firm's line of business through premiumisation or innovation, the option to restructure operations with the aim of achieving cost synergies and the option to rebalance a portfolio of assets through acquisitions and disposals, subject to the firm's risk management objectives and budget limitations. This thesis demonstrates how powerful real options can be in the modeling of investment projects, and options therein. In addition, by extending the idea of real options to the case of corporate valuation, in the context of the portfolio rebalancing option, we broaden the scope of real options applications. Each investment opportunity can be seen as an option, where the optimal investment strategy reflects the option's exercise and the maximum attainable payoff is the option's intrinsic value.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available