Open Access Open Access  Restricted Access Subscription Access

A FUZZY PAY-OFF METHOD FOR REAL OPTION VALUATION IN DETERMINATION OF MINING ENTERPRISE VALUE

Marian Turek, Adam Sojda

Abstract


The article presents the use of real options in determination of mining enterprise value. The value estimation is based on discounted cash flow method. The adoption of fuzzy numbers allows introducing a risk aspect to the known method of determination of enterprise value. A classic discounted cash flow method uses one scenario on the basis of which one value is determined. The method presented is grounded on three scenarios: optimistic, the most probable, pessimistic. On this basis the values defining a fuzzy number are indicated. Algorithm of this defuzzification, based on the idea of real options enables indicating a concrete value.

Keywords


enterprise value; pay-off method; real option; fuzzy numbers.

Full Text:

PDF

References


C. Carlson, R. Fuller, A fuzzy approach to real option valuation, Fuzzy Sets and Systems, (139) 2 (2003), pp. 297-312.

M. Collan, R. Fuller, J. Mezei, A fuzzy pay-off method for real option valuation, Journal of Applied Mathematic and Decision Sciences, Vol. 2009, 2009, Article ID 2238196, 14 pages, doi: 10.1155/2055/238196.

M. Collan, J. Kinnunen, A procedure for the rapid pre-acquisition screening of target companies using the pay-off method for real option valuation, Journal of Real Option Strategies, (4) 1 (2011), pp. 117-141.

A. Keswani, M. Shackleton, How real option disinvestment flexibility augments project NPV, European Journal of Operational Research, (168) 1 (2006), pp. 240-252.

I. Jonek-Kowalska, A. Michalak, Ryzyko, Koszt Kapitału i Efektywność w Procesie Finansowania Inwestycji Rozwojowych w Górnictwie Węgla Kamiennego, PWN, Warszawa 2012, p. 109. (in Polish)

W. Rudny, Opcje Rzeczowe w Procesie Tworzenia Wartości Przedsiębiorstwa, Wydawnictwo Akademii Ekonomicznej w Katowicach, Katowice, 2009. (in Polish)

M. Turek, Modele Finansowania Działalności Operacyjnej Przedsiębiorstw Górniczych, GIG Katowice, 2011

M. Turek, A. Sojda, Determination of enterprise value by using the fuzzy pay-off method for real option valuation, in Proceedings of the 7th IEEE International Conference on Intelligent Data Acquisition and Advanced Computing Systems (IDAACS’2013), Berlin, Germany, (12-14 September 2013), pp. 597-600.

L. Zadeh, Fuzzy Sets, Information and Control, (8) (1965), pp. 338-353.


Refbacks

  • There are currently no refbacks.