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Managerial flexibility using ROV : a survey of top 40 JSE listed companiesMokenela, Lehlohonolo 12 1900 (has links)
Thesis (MComm (Business Management))--University of Stellenbosch, 2006. / For the last 40 years, academics advocated the use of the traditional Discounted Cash
Flow (DCF) techniques but these suggestions were ignored by practitioners for a long
time. The Net Present Value (NPV), Internal Rate of Return (IRR) and Present Value
Payback Period (PVPP) are now some of the more widely used traditional DCF-based
techniques, especially among large firms. However, academics are now criticising these
techniques as they are based on rigid assumptions that ignore the management of
flexibility in projects. The Real Option Valuation (ROV) is suggested as an alternative
technique because it implicitly incorporates this flexibility in project valuation. With
ROV, opportunities in projects are treated as real options and are therefore valued using
financial option principles. Real options give the firm the opportunity to act on an
investment project (invest, abandon, rescale) at a later date, when more information is
available.
As with the traditional DCF-based techniques in the past, few firms seem to have adopted
ROV despite academics’ recommendations. This study is thus aimed at determining
through a survey, whether the largest firms in South Africa, specifically those included in
the JSE/FTSE Top 40 index, are using ROV. Based on the results of the survey, it is
concluded that firms generally do not use ROV as only nine percent of the respondents
were found to be using it. This is largely attributed to managers being unaware of the
technique, and to some extent, to the technique’s complexity. On the other hand,
managers were generally found to recognise the flexibility despite not using ROV,
although it was not confirmed whether they quantify this flexibility.
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Avaliação das Opções Reais de Conversão e Abandono para Uma Mineradora de Minério de Ferro Sob Cenário de StressGomes, Daniella Maia 29 May 2015 (has links)
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Previous issue date: 2015-05-29 / The iron ore market has gone through a period of stress in recent months. The slowdown of Chinese investments in infrastructure resulted in a negative outlook for the demand of this commodity. At the same time, the beginning of operations of new projects with significant production output increased the supply of this product. This scenario resulted in the decline of the iron ore prices in the global market and diminished returns to the mining industry. In this context, the purpose of this study is to evaluate the managerial flexibility available to managers of operating mining companies to suspend or close the operations depending on the iron ore prices. These decisions will be studied through the Theory of Real Options, where the switching option will be applied in the suspension and reopening situations for the mine and the abandonment option will be applied on the closing situation. The stochastic process to be followed by the iron ore prices will be the Geometric Brownian Motion, implemented through a Binomial Model as proposed by Cox, Ross and Rubinstein (1979). The result of the work proves the value of real options studied and indicates that these real options are more valuable in stress scenarios, when the iron ore price is undervalued. / O mercado de minério de ferro tem passado por um período de stress nos últimos meses. O arrefecimento dos investimentos chineses em infraestrutura resultou em perspectivas negativas para a demanda dessa commodity. Paralelamente, a entrada em operação de novos projetos com volume de produção relevante aumentou a oferta desse produto no mercado. Essa conjuntura de fatores resultou na queda do preço do minério de ferro no mercado mundial e em um cenário de retornos reduzidos para as mineradoras. Nesse contexto, o objetivo do presente estudo é avaliar a flexibilidade gerencial, disponível aos administradores de mineradoras operacionais, de suspender ou fechar o empreendimento dependendo do preço do minério de ferro. Essas decisões serão estudadas através da Teoria das Opções Reais, onde a opção de conversão será aplicada na situação de suspensão e reabertura da mina e a opção de abandono será aplicada na situação do seu fechamento. O processo estocástico a ser seguido pelo preço do minério de ferro será o Movimento Geométrico Browniano, implementado através de um Modelo Binomial conforme proposto por Cox, Ross e Rubinstein (1979). O resultado do trabalho comprova o valor das opções reais estudadas e indica que essas opções reais têm maior valor em cenários de stress, quando o preço do minério de ferro está desvalorizado.
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