This tool helps evaluation of options by multiple models to help make investment decisions easily.
The Excel Real Options Valuation Template combines a set of option valuation tools. These tools are able to quantify strategic value from uncertainty and risks in investment timing and economic environment dynamics. This valuation is different from traditional discounted cash flow approach. It tries to quantify assumptions based on the volatility of cash flows of an investment or business. The Excel Real Options Valuation template provides analytical tools that use modified option pricing theory. The analysis leads to evaluation of investment strategy alternatives and estimates of the value of undertaking them. The `Quick Start` helps choose the correct Real Options Valuation tool out of the multiple tools supported. User then is able to arrive at an investment decision and associated opportunity through analysis and quantification of the decision factors.
The tool arrives at the input flow and is assisted by each Real Options Valuation theory and provides detailed explanations for ease of interpretation. The modified Black Scholes option pricing model helps evaluate delaying, expanding, or abandoning investment projects. Modifications introduced by the tool to the traditional Black Scholes model include the accounting of dividends or cash flows from the underlying asset. It provides you the ability to exercise the option before the time in which the opportunity is expected to expire. The Game Theory model is based on the Nash equilibrium theory. It determines the optimal strategy as a leader, follower or entering the market simultaneously in a competitive environment. The Binomial tree option valuation model helps evaluate complex strategic options with multiple critical decision stages. Categorized investment and/or industry risk profiles are provided and can be modified to utilize across Real Options Valuation models as a proxy for risk assumptions. Applying risk assumptions help arriving at more realistic options. This is a very good tool.