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46. T rigeorgis L . (1995), ―M ethods for E valuat<strong>in</strong>g C apital Investm ent D ecisio nsU nder U ncerta<strong>in</strong>ty‖. In: R eal O ptions <strong>in</strong> C apital Investm ent M odel, S trategies,and Applications, Trigeorgis L (Ed) pp31-46, London: Praeger47. Trigeorgis L. (1996), Real Options: Managerial Flexibility and Strategy <strong>in</strong>Resource Allocation. London: The MIT press48. T rigeorgis, L . (2001), ―R eal O ptions: A n O vervie‖, <strong>in</strong> E . S . S chw artz and L .Trigeorgis (edi<strong>to</strong>rs), Real Options and Investment under Uncerta<strong>in</strong>ty: ClassicalRead<strong>in</strong>gs and Recent Contributions, MIT Press:US, pg.103-13449. Trigeorgis, L. (2002), Real Options: Managerial Flexibility and Strategy <strong>in</strong>Resource Allocation, 6 thedition, Asco Trade Typesett<strong>in</strong>g Ltd: Hong Kong,pg.121-17250. Trigeorgis L . S m it H . (2004), ―R eal O ptions and G am es‖, P r<strong>in</strong>ce<strong>to</strong>n U niversityPressWebsite Reference:51. Federal Reserve Statistical Release (2006), Selected Interest Rates, Retrieved on31/08/2006, available at: http://www.federalreserve.gov/releases/h15/data.htm52. Kellogg, D., Charnes, J. M., Demirer, R., (1999). Valuation <strong>of</strong> a BiotechnologyFirm: An Application <strong>of</strong> RealOptions Methodologies, Research paper presented atthe 3rd Annual Real Options Conference, June, The Netherlands. Innovation.org,Inside R&D, Retrieved on 31/08/2006, available at:http://www.<strong>in</strong>novation.org/<strong>in</strong>dex.cfm/nonav/Inside_R_&_D#l<strong>in</strong>k153. Technopolis (2005), Review <strong>of</strong> Projects Selected for Fund<strong>in</strong>g under the DTITechnology Programme, Technopolis limited, SPRU, available at:http://www.technopolis.co.uk/downloads/571_TP_F<strong>in</strong>al_051115.pdf#search=%22R%26D%20miles<strong>to</strong>ne%20can%20be%20considered%20as%20<strong>in</strong>vest<strong>in</strong>g%20<strong>in</strong>%20a%20call%20option%20on%20the%20forthcom<strong>in</strong>g%20miles<strong>to</strong>ne%2254. Wierenga D.E and Ea<strong>to</strong>n C.R. (2005), Phases <strong>of</strong> Product Development, Office <strong>of</strong>Page | 75
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APPLICATION OF REAL OPTIONS VALUATI
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Table of ContentsAbstract .........
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List of TablesTable 5.1: Value of O
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Chapter One— IntroductionAs one o
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Then, in Chapter 4, the case study
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and we will have the right to take
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project, to get its salvage value,
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The option to switch:If assets have
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2.2 Advantages of Real Option Valua
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In the case of pharmaceutical R&D,
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delayed in time. Undertaking one pr
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Figure 2.2: Advantages and disadvan
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smallest possible payoff of zero, w
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options applications is the binomia
- Page 29 and 30: t: years to expirationr: annual ris
- Page 31 and 32: Chapter Three— Apply Real options
- Page 33 and 34: on Howell et al (2001).3.1.1 Precli
- Page 35 and 36: approved.3.2 real options valuation
- Page 37 and 38: Figure 3.3: Comparison of a call op
- Page 39 and 40: applying the principals of activity
- Page 41 and 42: that has occurred in the past. Depe
- Page 43 and 44: Chapter Four— Case StudyFor this
- Page 45 and 46: 4.3 DavanrikLAB Pharmaceuticals ori
- Page 47 and 48: efficacious for depression only, a
- Page 49 and 50: Chapter Five— Case Study Analysis
- Page 51 and 52: figure below:Figure 5.3: NPV of Dav
- Page 53 and 54: Merck & Co (10%), which gives $2338
- Page 55 and 56: approval and other issues. Therefor
- Page 57 and 58: of $345m at year 0 (which is $672.3
- Page 59 and 60: project turns out to be unprofitabl
- Page 61 and 62: these three options, the risk-free
- Page 63 and 64: ewrite as, noting all the costs (in
- Page 65 and 66: Figure 5.10: Valuation of Option A
- Page 67 and 68: Figure 5.12: Valuation of Option A
- Page 69 and 70: Figure 5.13 Valuation of Compound r
- Page 71 and 72: $ in millionmillion to $113.97 mill
- Page 73 and 74: Chapter Six— Limitations and conc
- Page 75 and 76: discovery projects, arrives in a di
- Page 77 and 78: References1. Amram M & Kulatilaka N
- Page 79: 31/08/2006, available at: http://ho