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2007•Journal of Xinjiang Normal UniversityRequires access

Application of the Improved NPV Method Based on the Real Option Prising to the Project Appraisal of Venture Capital

HE Jiangni

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Abstract

By analyzing the limitations of the application of the traditional NPV method to the decision of venture capital project appraisal,this paper proposes an investment project appraisl model of the improved NPV method which is based on the real option prising.And it also points out that the real value of a project is equal to the NPV add increased OP,because of fiexibility of the project.In the end,it demonstrates with examples the application of the NPV method to venture capital.

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What this paper is about

By analyzing the limitations of the application of the traditional NPV method to the decision of venture capital project appraisal,this paper proposes an investment project appraisl model of the improved NPV method which is based on the real option prising.And it also points out that the real value of a project is equal to the NPV add increased OP,because of fiexibility of the project.In the end,it demonstrates with examples the application of the NPV method to venture capital.

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Available abstract

By analyzing the limitations of the application of the traditional NPV method to the decision of venture capital project appraisal,this paper proposes an investment project appraisl model of the improved NPV method which is based on the real option prising.And it also points out that the real value of a project is equal to the NPV add increased OP,because of fiexibility of the project.In the end,it demonstrates with examples the application of the NPV method to venture capital.

Key concepts: Capital budgeting, Venture capital, Net present value, Project appraisal, Value (mathematics), Investment (military), Business, Capital investment

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