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A real options application in the automotive components industry

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Abstract

En este trabajo se analiza la relevancia de las opciones reales en la industria de componentes del autom¢vil. Con este prop¢sito, estudiamos en profundidad el caso de una inversi¢n directa exterior emprendida por un importante proveedor del sector. El proyecto de inversi¢n evaluado pertenece a esa clase de inversiones que, a£n presentando un VAN negativo, son aceptadas a cuenta y raz¢n de su valor estrat‚gico. En la investigaci¢n de este caso se identifican y analizan las distintas opciones de crecimiento y de flexibilidad asociadas al compromiso inicial de recursos. La valoraci¢n de dichas opciones se efect£a mediante la aplicaci¢n de un modelo log-binomial adaptado a la naturaleza del proyecto. La realizaci¢n de este "estudio cl¡nico" proporciona nueva evidencia emp¡rica sobre la relevancia de las opciones reales en la valoraci¢n de las inversiones empresariales. En particular, el an lisis revela el papel jugado por el apalancamiento operativo y por las opciones de renovaci¢n de contratos y de abandono de la inversi¢n, en los procesos de creaci¢n de valor de aquellas empresas cuya demanda se caracteriza por el dominio estrat‚gico de sus clientes This paper analyzes relevance of real options in the automotive component industry. For this purpose, we focus on the study of a foreign direct investment implemented by an automotive component supplier. The project belongs to a group of investments that, presenting a negative NPV, are accepted because of its strategic value. We identify and analyse the growth and flexibility options embedded in the initial resources allocation. The value of these options is estimated through a log-binomial model adapted to the project specificity. According to our valuation results, this clinical study brings forward new evidence in favour of the relevance of real options on a firm's market value. Furthermore, our study emphasizes the role played by operating leverage, and options to growth and to abandon, in firms which demand is dominated by a few large customers

Suggested Citation

  • Azofra Palenzuela, Valent¡n & Fuente Herrero, Gabriel de la, 2000. "A real options application in the automotive components industry," Working Papers "New Trends on Business Administration". Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". 2000-02, Interuniversity Research Master and Doctorate Program (with a quality mention of ANECA) on "Business Economics", Universities of Valladolid, Burgos, Salamanca and León (Spain). Until 2008, Interuniversity Doctorate Program (with a quality mention of ANECA) “New trends in Business Administration”, Universities of Valladolid, Burgos, and Salamanca (Spain). Master en Investigación y Programa de Docto.
  • Handle: RePEc:ntd:wpaper:2000-02
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