VALUATION OF THE LIABILITY STRUCTURE BY REAL OPTIONS [electronic resource].
- Heller, David
- [Place of publication not identified] : JOHN WILEY, 2022.
- Physical Description:
- 1 online resource
- Cover -- Half-Title Page -- Title Page -- Copyright Page -- Contents -- Introduction -- Chapter 1. The Utility of Real Options in the Valuation of Liabilities -- 1.1. Introduction -- 1.2. Real options: a mitigating alternative to the deficiency of traditional valuation methods -- 1.2.1. The limits of traditional approaches -- 1.2.2. The alternative of real options -- 1.2.3. Black-Scholes optional modeling -- 1.3. Intersections between approaches to assets valuation -- 1.3.1. Convergence between the Cox-Ross-Rubinstein (1979) and the Black-Scholes (1973) models and the Merton formula (1973) -- 1.3.2. Convergence between the CAPM and the Modigliani-Miller theory -- 1.3.3. Convergence between the Black-Scholes model and the Modigliani-Miller theory outside of taxation -- 1.4. Valuation of liabilities structures with real options -- 1.4.1. The economic value of equity and net debt -- 1.4.2. The impact of the risk debt on the time value of equity and the resolution of conflict between creditors and shareholders -- 1.5. Conclusion -- Chapter 2. The New Allocation of Company Value Using the Optional Approach -- 2.1. Introduction -- 2.2. Economic value of debt and systematic risk adjustment of equity -- 2.2.1. Optional valuation of debt and the issues associated with getting into debt -- 2.2.2. Combination of CAPM and the options model: the systematic risk of equity and the rate of return required by shareholders -- 2.2.3. Situations that impact financial structure -- 2.3. Integration of organizational problems between shareholders and debtors -- 2.3.1. The interaction of financing decisions -- 2.3.2. Accounting for information costs and protection clauses -- 2.3.3. Bankruptcy costs, getting into permanent debt and optimizing the debt ratio -- 2.4. Mechanisms of refinancing debt and the impact on the value of equity -- 2.4.1. Risks of refinancing. and 2.4.2. Reimbursing loans at intermediate intervals and the impact on the value of equity -- 2.5. Conclusion -- Chapter 3. Applications of Real Options on Financial Structure Valuation -- 3.1. Introduction -- 3.2. Application to the stock market index of a country: the CAC 40 -- 3.2.1. Databases, methodology and hypotheses -- 3.2.2. Equality test for asset and equity volatility and the interpretation of results -- 3.2.3. Equality test for growth potential of stock prices based on the approach of brokers and Black-Scholes-Merton and the interpretation of results -- 3.2.4. Equality test for debt ratios based on net debt from the financial states of companies and the recalculation of net debt using the Black-Scholes-Merton approach, and the interpretation of results -- 3.2.5. Regression coefficient to explain growth potential of stock prices -- 3.3. Application to a business sector: the cinema industry -- 3.3.1. Databases, methodology and hypotheses -- 3.3.2. Equality test for volatility of assets and equity and interpretation of results -- 3.3.3. Equality test for the growth potential of stock prices based on the approach of brokers and Black-Scholes-Merton -- 3.3.4. Test for equal debt ratios based on net debt from the financial reports of companies and the recalculation of net debts using the Black-Scholes-Merton approach -- Conclusion -- Appendices -- Appendix 1 -- Appendix 2 -- Appendix 3 -- Appendix 4 -- Appendix 5 -- Appendix 6 -- Appendix 7 -- Appendix 8 -- Appendix 9 -- Appendix 10 -- Appendix 11 -- Appendix 12 -- Appendix 13 -- Appendix 14 -- Appendix 15 -- Appendix 16 -- Appendix 17 -- Appendix 18 -- Appendix 19 -- Appendix 20 -- Appendix 21 -- Appendix 22 -- Appendix 23 -- Bibliography -- Index -- Other titles from iSTE in Innovation, Entrepreneurship and Management -- EULA.
- The valuation of the liability structure can be determined by real options because the shares of a company can be regarded as similar to the purchase of a financial call option. Therefore, from this perspective, debt can be viewed as the sale of a financial put option. As a result, financial analysts are able to establish different valuations of a company, according to these two financing methods. Valuation of the Liability Structure by Real Options explains how the real options method works in conjunction with traditional methods. This innovative approach is particularly suited to the valuation of companies in industries where an underlying asset has high volatility (such as the mining or oil industries) or where research and development costs are high (for example, the pharmaceutical industry). Integration of the economic value of net debt (rather than the accounting value) and integration of the asset volatility are the main advantages of this approach.
- 9781119988298 (electronic bk.)
1119988292 (electronic bk.)
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