Product Description

A New Approach to the Valuation of Businesses and Technologies Based on Options Theory

The Real Options Solution presents a practical approach to applying real options analysis that is based on one core insight: all business plans are options. Whether youre a manager or an investor, this straightforward guide offers a proven new approach to the valuation of businesses and technologies based on options theory–the "total value" model. The Real Options Solution outlines a six-step method for applying this model in a high-risk environment, whether you want to evaluate . . .

• Start-ups
• R&D-intensive companies
• Bellwether companies
• Capital investments
• Hypothetical business problems

. . . and describes how diminishing returns, risk, and innovation can affect this model.

Filled with real-world examples and insights from F. Peter Boer–an expert on valuation and risk–The Real Options Solution provides comprehensive coverage of the real options approach to valuation and will help you pinpoint opportunities which emerge from high-growth and high-volatility situations.

Drawing on the concepts of his earlier book, Valuation of Technology, and on his extensive experience as a senior executive in R&D intensive industries, Peter Boer, in his new book The Real Options Solution, has provided vital and quantitative new insight for those investing in an increasingly risk-dominated and volatile marketplace. In The Real Options Solution the author combines traditional economic evaluation with strategic evaluation based on option theory—on the possible courses of action (options) that transcend the purely economic evaluations in both time and very frequently economic and other returns. This excellent book should be required reading for venture capitalists and indeed both those in, and those contemplating entry into todays and tomorrows markets. The basic ideas here are both simple—like all really good ideas—and potentially very powerful as exemplified in Boers charming presentation of Queen Isabellas investment in Columbuss first voyage. —D. Allan Bromley, Yale University

Dr. Boers ideas about the economics and management of industrial R&D have had a significant impact. This novel and wonderfully written book provides a modern framework for the analysis of high-risk, high-reward endeavors, which include research and development. The methodology has great intellectual appeal: it integrates real options analysis and net present value analysis, thus capturing the traits of the “new” and “old” economies in the same analytical framework. This it does in a practical, pragmatic manner, suitable to real-life problems in opportunity (and risk) management. —L. Louis Hegedus, Senior Vice President, Research & Development, ATOFINA Chemicals, Inc.

The Real Options Solution should be read by CEOs, investors, and anyone else interested in making sense of our markets and our economy.—Jeffrey E. Garten, Dean, Yale School of Management

This book is exciting…[Boer has] taken an intellectually challenging subject and made it very interesting. —Jeffrey M. Lipton, President & CEO, NOVA Chemicals

Product Details

• Amazon Sales Rank: #1259590 in Books
• Published on: 2002-02-04
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 416 pages

Review
Drawing on the concepts of his earlier book, Valuation of Technology, and on his extensive experience as a senior executive in R&D intensive industries, Peter Boer, in his new book The Real Options Solution, has provided vital and quantitative new insight for those investing in an increasingly risk-dominated and volatile marketplace. In The Real Options Solution the author combines traditional economic evaluation with strategic evaluation based on option theoryon the possible courses of action (options) that transcend the purely economic evaluations in both time and very frequently economic and other returns. This excellent book should be required reading for venture capitalists and indeed both those in, and those contemplating entry into todays and tomorrows markets. The basic ideas here are both simplelike all really good ideasand potentially very powerful as exemplified in Boers charming presentation of Queen Isabellas investment in Columbuss first voyage. (D. Allan Bromley, Yale University)

Dr. Boers ideas about the economics and management of industrial R&D have had a significant impact. This novel and wonderfully written book provides a modern framework for the analysis of high-risk, high-reward endeavors, which include research and development. The methodology has great intellectual appeal: it integrates real options analysis and net present value analysis, thus capturing the traits of the new and old economies in the same analytical framework. This it does in a practical, pragmatic manner, suitable to real-life problems in opportunity (and risk) management. (L. Louis Hegedus, Senior Vice President, Research & Development, ATOFINA Chemicals, Inc.)

The Real Options Solution should be read by CEOs, investors, and anyone else interested in making sense of our markets and our economy. (Jeffrey E. Garten, Dean, Yale School of Management)

This book is exciting[Boer has] taken an intellectually challenging subject and made it very interesting. (Jeffrey M. Lipton, President & CEO, NOVA Chemicals)

From the Publisher
Drawing on the concepts of his earlier book, Valuation of Technology, and on his extensive experience as a senior executive in R&D intensive industries, Peter Boer, in his new book The Real Options Solution, has provided vital and quantitative new insight for those investing in an increasingly risk-dominated and volatile marketplace. In The Real Options Solution the author combines traditional economic evaluation with strategic evaluation based on option theory-on the possible courses of action (options) that transcend the purely economic evaluations in both time and very frequently economic and other returns. This excellent book should be required reading for venture capitalists and indeed both those in, and those contemplating entry into today's and tomorrow's markets. The basic ideas here are both simple-like all really good ideas-and potentially very powerful as exemplified in Boer's charming presentation of Queen Isabella's investment in Columbus's first voyage. (D. Allan Bromley, Yale University)

Dr. Boer's ideas about the economics and management of industrial R&D have had a significant impact. This novel and wonderfully written book provides a modern framework for the analysis of high-risk, high-reward endeavors, which include research and development. The methodology has great intellectual appeal: it integrates real options analysis and net present value analysis, thus capturing the traits of the "new" and "old" economies in the same analytical framework. This it does in a practical, pragmatic manner, suitable to real-life problems in opportunity (and risk) management. (L. Louis Hegedus, Senior Vice President, Research & Development, ATOFINA Chemicals, Inc.)

The Real Options Solution should be read by CEOs, investors, and anyone else interested in making sense of our markets and our economy. (Jeffrey E. Garten, Dean, Yale School of Management)

This book is exciting...[Boer has] taken an intellectually challenging subject and made it very interesting. (Jeffrey M. Lipton, President & CEO, NOVA Chemicals)

From the Inside Flap
The Real Options Solution

The Real Options Solution: Finding Total Value in a High-Risk World offers a proven new approach to the valuation of businesses and technologies based on options theory. This straightforward, practical guide presents an innovative approach–the "total value" model–to applying real options analysis that is based on one core insight: all business plans are options.

Valuation and risk expert F. Peter Boer provides a solid foundation to the total value approach by examining the differences among book, eco-nomic, and strategic capital, and by using recent business cases to illustrate the point. A review of the methods and limitations of conventional discounted cash flow (DCF) economic valuation sets the stage for the total value approach–a model which bridges the gap between traditional quantitative tools, such as DCF, and the intuitive nature of futures options. Boer outlines a six-step method for applying this model in a high-risk environment, whether you want to evaluate:

• Start-ups
• R&D-intensive companies
• Bellwether companies
• Capital investments
• Hypothetical business problems

After detailed discussions of how options may be used to manage risk and why all business plans really are options, The Real Options Solution explores how changes in total value are driven by three major factors: risk, diminishing returns, and innovation. You’ll learn how to recognize the signs of value destruction and use innovation to overcome the law of diminishing returns. You’ll also understand how the management of systematic (market) risk requires different techniques–and provides different opportunities–than the management of unique (private) risk. Most importantly, you’ll see how human and intellectual capital are the keys to value creation in a modern economy.

Through a mix of contemporary and historic examples, The Real Options Solution provides a quantifiable approach to the problem of the strategic premium–the gap between apparent economic value and actual value as determined by the marketplace. In outlining how and why the total value model works, this comprehensive guide will help you identify the opportunities of extraordinary strategic value that emerge from circumstances of high growth and high volatility.

Customer Reviews

The most practical book ever read on the subject!
I would like to congratulate Dr. Boer on his success with making "real options" real for the practitioners. I have read many, if not most, most of the books out there on this topic, and found none to be as accessible and fun to read as Dr. Boer's treatment of this subject.

I have also bought his other book, The Valuation of Technology - Business and Financial Issues in R&D. Again, full of practical insights that are not available elsewhere.

I fail to understand the scathing review of the reader from Norway. Was this person expecting to learn about financial options, instead of real options, from this book? In that case, it was the reader's mistake for picking the wrong book! For real options, this book has no peer. I would recommend it to anyone who wants to apply the real options theory to real-world problems.

Thanks Dr. Boer for a job well done and for making a real contribution to realistic valuation and pricing of business opportunities.

Essential Reading for Valuation of Best Strategies
Dr. Peter Boer's latest book, THE REAL OPTIONS SOLUTION, extends the Yale professor's reputation for highly relevant insights into HOW to best adapt valuation and management decision approaches to today's new challenges. One needs to look no further than Winter 2001-2 headlines about corporate collapses to realize that there's are major limitations with ordinary first generation discounted cashflow (DCF) methods when it comes to valuation of complex companies-- particularly those in advanced technology fields and/or with complex financing structures. The near-term witch hunt response is to dump 'em all. But when the temporary period of Post-Enron / Post-3G and Fiber Excessive Pessimism recedes, management and institutional investors alike will realize that they still need new guidance for valuing corporate decisions. Towards this aim, Professor Boer elevates Real Options from its slightly dusty academic origins to a new dynamic role at the center of major corporation decision making and financial marketplace valuation. To me, the key word in the book's title is SOLUTIONS-- applied in the way that Dr. Boer describes, Real Options are used to represent strategy alternatives to supplement and fundamentally improve core discounted cashflow valuation. His prize, for readers: a full perspective on the corporation's ultimate source of wealth: THE VALUE OF ITS STRATEGIC DECISIONS. This is must reading for corporate executives who seek highest value decisions and ultimately, highest possible shareholder value for the corporation they run. This is also essential reading for institutional investors and other valuation-influencers searching for the best methods for separating tomorrow's outperforming corporations in value terms from the dross.

A significant contribution to the management literature
Dr. Boer's ideas about the economics and management of industrial R&D have had a significant impact. This novel and wonderfully written book provides a modern framework for the analysis of high-risk, high-reward endeavors which include research and development. The methodology has great intellectual appeal: it integrates real options analysis and net present value analysis, thus capturing the traits of the "new" and "old" economies in the same analytical framework. This it does in a practical, pragmatic manner, suitable to real-life problems in opportunity (and risk) management.