Valuation method based on real options and traditional method: case study of Internet companies in China

Abstract

Internet companies have gradually become a pillar industry in China. The capital market activities which need to be based on the value assessment of the Internet company, are extremely frequent. But due to the characterizes of Internet companies, the traditional extremely frequent. But due to the characterizes of Internet companies, the traditional valuation method is not suitable. This paper analyzes the characteristics of Internet enterprises and finds that the value of Internet enterprises consists of the existing value and the potential value of enterprises. This paper analyzes the traditional evaluation method and the potential value of enterprises. This paper analyzes the traditional evaluation method and the Real Options evaluation method and introduces non-financial factors to establish a new model based on the DCF model and the BS model. Finally, the paper takes a Chinese famous Internet company——Alibaba Group Holding as an example to conduct an empirical study, and it compares four Chinese Internet companies to verify the validity of the model.