On the Valuation of Companies with Growth Opportunities

Abstract

Each company faces day to day investment opportunities. Just by staying in business the company is taking a decision of reinvesting capital. These opportunities have to be fairly valued to overcome misallocation of resources. A project with high growth opportunities requires high reinvestments to take full advantage of them until it reaches its mature stage. These investments can be seen as a succession of call options on future growth. When a company with such prospects is valued using the discounted cash flow technique and growth is taken implicitly in the growing cash flows and the residual value, the value thus obtained will be higher than the true one (under certain circumstances). Technology advances and the effects of globalization create enormous growth opportunities, and so misvaluation risks are higher.

Profitability, Growth Opportunities, Leverage, Ukuran Perusahaan, Dan Kebijakan Dividen

“…Peluang untuk tumbuh juga sangat terkait dengan bagaimana perusahaan mengambil projek di masa depan. Keputusan terkait dengan pertumbuhan yang biasanya dihadapi oleh para manajer antara lain: melakukan ekspansi bisnis secara vertikal (membeli atau membuat suatu bisnis dengan value chain), melakukan ekspansi bisnis secara menyamping (membeli atau membuat bisnis yang tidak terkait secara langsung dengan inti bisnis), dan melakukan ekspansi (memperoleh market share) terkait dengan scope maupun skala bisnis (Dapena, 2003).…”

Decision-making for Investment Based On Option and Term Structure

“…Integrate (27) In the above term structure model of interest rates, there is no level effect of interest rates and there is the possibility of interest rates being negative. In the next, we study the option pricing formula based on model (9), the term structure model of interest rate closer to the reality.…”

Incertidumbre en los proyectos de investigación y desarrollo (I+D). Un estudio de la literatura

“…2 Presentan además una lista de la literatura de la mayoría de los métodos anteriores relacionados con la selección de proyectos de I+D. Johnson, Neave y Pazderka (2002) y Dapena (2003) comentan sobre los métodos tradicionales para la valoración de proyectos de inversión (q de Tobin, valor presente, modelo de Gordon, Modigliani-Miller, entre otros).…”