STEP 4- IDENTIFY DIFFERENT OPTIONS

TO SOLVE THE PROBLEM

Presented By:
Luis Alejandro Sierra
INNOVATION CASE

3-D Printers – New Story Charity

GROUP: 23

UNIVERSIDAD NACIONAL ABIERTA Y A DISTANCIA

VALORACIÓN Y NEGOCIACIÓN DE TECNOLOGÍA
CALI
NOVEMMBER 2018
Valuation methods comparative chart
Valuation
Definition When is it applied?
method
Estimates the cost of recreating the future
Estimates the cost of recreating the future utility of
utility of the technology being evaluated,
Cost approach the technology being evaluated, and assumes this
and assumes this value to be the future
value to be the future returns from the technology
returns from the technology
Is effective for assessing real estate,
vehicles, general purpose computer
Estimates the market price of a similar technology
Market software, liquor license, and franchises, it is
approach
that has already been traded on the market and
not effective for assessing the cases like
applies it to their assessment
most intangible assets or intellectual
property
Estimation of the income generation period,
Considers the sum of the present values of future
the
cash flows of the technology as the value of the
Estimation of future income, the risks of no
Income technology. This concept, disregarding the costs of
approach
profit,
technology development, determines the value of
And the conversion of future earning into
the technology according to its feasibility of
present
creating expected profits
Value
Incorporates the financial concept of options in
technology valuation, and as options are not
considered as an obligation but a right, the
investors have the opportunity to correct their
decision according to future environment When there is no need to rely on a
Real options
subjective assessment
Using real options in investment decisions such as
research and development projects and technology
transfer can guarantee flexibility against future
uncertainty in decision making
Goodwill mind map
 Typologies of Real options chart
•Typology of Real Options

Real
Description Potential Applications
Option
Possibility to defer capital outlay for an
Industries where institutional mechanisms such as
irreversible investment project with
licences or patents provide insulation from
Delay uncertainty about important influencing
competitive action. (e.g. natural resource extraction,
factors dissolving over time; Particularly
real estate development)
sensitive to competitive interaction.
Possibility to abandon a project before the end
of its planned useful life by selling it in Capital intensive industries with fairly efficient
Abandon
secondary market and thus realizing the secondary markets.
salvage value.
Possibility to increase (decrease) production
Cyclical industries such as natural resource
capacity of an initial investment against a
Expand / extraction or consumer goods. Entry into new
follow-up capital outlay (future cost savings)
Contract market with considerable uncertainty about future
once the capacity of the base investment is no
demand.
longer sufficient (too large)
Input: power generation, refineries, manufacturing
Possibility to switch between different processes, where input substitutes are available,
processes (products), i.e. inputs (outputs) multinational companies with geographically
Switchin based on relative cost; Incorporates also separate production facilities. Output: Industries
g switching the production location for where small batch size or tailor-made products are
multinational companies due to changes in important; Industries that face a high volatility of
relative factor costs. demand and are subject to fads and trends (e.g.
toys, apparel).
Compou
nd Mixture of any of simple options Where there are two or more sources of uncertainty.
•Methodologies of Real Option Valuation
Methodology Description Formula
Black-Scholes model is a closed form
solution for pricing a European call on
non-divided paying stocks. It uses the
Black-Scholes continuous-time geometric Brownian
Model motion as underlying stochastic process.
The continuous application of the
replicating portfolio argument leads to
their partial differential equation.
The binomial option pricing model was
popularized by Cox, Ross, Rubinstein
(1979). It is based on the replicating
portfolio argument described in section
3.4, except that the stock-price
movements follow a more strictly
multiplicative binomial tree72. The
Binomial Tree
fundamental idea is that a certain time
Model
period, for instance, the time to expiration
for an option, can be divided into equally
spaced, finite intervals Δt. The strict key
assumption here is that over each finite
time interval, there are only two states the
underlying asset price can attain – up
movement (u) or down movement (d).
Black-Sholes exercise solution screenshot (Exercise C)
Black-Sholes exercise solution screenshot (Exercise C)
Innovation case questions
a) Chosen innovation case name: 3D - PRINTERS

b) What kind of valuation method would you use to value this

kind of innovation? Explain your reasons:
- Net Present Value Method, because is a method commonly used
to value innovation projects. It can measure the excess or
shortfall of cash flows in present value terms using a discount
rate.
Innovation case questions
a) Create a mind map explaining the answer to the following question:
 Why is it recommended to use real options despite other methods
to value software and new technologies projects?
 Innovation case questions

a) If the case should be value by real options, describe the type of option
you would apply, explaining your answer.

It Would be the Option to Switching:

Switching options are the right to close an operation that is currently

opened and the right to open it later for a different fixed cost to a
common type of option. The option to exit and then re-enter an industry,
the option to switch between two modes of operation, and the option to
start up and shut down a facility are all switching options

The reason why is because 3D-Printers can be apply in a lot of industries

and the posibilitie to change the way to developt the project must be on
the table
 REFERENCES

 Kang, Y. (2009). Real Option Valuation of Product Innovation.  Retrieved from:

http://bibliotecavirtual.unad.edu.co:2051/login.aspx?direct=true&db=nlebk&AN
=793059&lang=es&site=eds-live
 Baek, D., Sul, W., Hong, K., and Kim, H. (March 1, 2007) A technology valuation
model to support technology transfer negotiations. R&D Management.
Retrieved from:http://bibliotecavirtual.unad.edu.co:2051/login.aspx?direct=true&db=
buh&AN=32100351&lang=es&site=eds-live