The study considers the product life cycle in the stages of technological innovation, and focuses on how to evaluate the optimal investment strategy and the project value. It applies different product stages (three stages including production innovation, manufacture innovation, and business innovation) factors to different risks to build a technology innovation strategy model. This study of option premiums aims for the best strategy timing for each innovation stage. It shows that the variation of business cycle will affect the purchasing power under the uncertainty of Gross Domestic Product (GDP). In application, the compound binomial options for the manufacture innovation will only be considered after the execution of the production innovation, whereas the operation innovation will only be considered after the execution of the manufacture innovation. Thus, this paper constructs the dynamic investment sequential decision model, assesses the feasibility of an investment strategy, and makes a decision on the appropriate project value and option premiums for each stage under the possible change of GDP. Numerically, the result shows the equity value of the investment is greater than 0. Therefore, this paper recommends the case firm to invest in its innovation project known as one-time passwords. Sensitivity analysis shows when the risk-adjusted discounted rate r increases, the risk of the investment market increases accordingly, hence the equity value must also be higher in order to attract the case firm’s investment interest. Also, the average GDP growth rate u sensitivity analysis results in different phenomena. The equity value gradually decreases when the average GDP growth rate rises. When the average GDP growth rate u rises to a certain extent, however, its equity value is gradually growing. The study investigates the product life cycle innovation investment topic by using the compound binomial options method and therefore provide a more flexible strategy decision compared with other trend forecast criteria.
This paper is aimed at the call of the United Nations Intergovernmental Panel on Climate Change (IPCC) for the need to maintain global warming within a controllable range. The goal is to target carbon emissions to achieve “net-zero” emissions, along with constructing a green energy investment strategy model for firms in response to government’s environmental protection policies. The paper uses the real options approach of dynamic investment decision to construct an investment decision model. Considerations include government taxation of carbon emissions, subsidies to reduce carbon emission policies, and incentives for firms to renew their investments in green energy equipment. Assuming that there is uncertainty in government carbon emission taxes and a reduction of carbon emission subsidies, the changes follow the joint geometric Brownian movement. We used this model to solve the optimum of the threshold for carbon emission taxes and of carbon emission reduction subsidies ratio. If carbon emission taxes and carbon emission reduction subsidies ratio are higher than the threshold, a firm suspends investment in green energy equipment because government subsidies are insufficient. If carbon emission taxes and the carbon emission reduction-subsidy ratio are less than or equal to the threshold, then a firm is qualified for the government’s subsidies for reducing carbon emissions, and the firm invests in green energy equipment. The results of this study can provide reference for firms to invest in green energy equipment, and for government control of carbon emission policies. This policy can effectively reduce carbon emissions and achieve co-construction, co-governance, and the sharing of innovative social governance patterns. Finally, it can create a win–win situation between the government, firms, and society.
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