1. Catalog
  2. Finance
  3. Options Pricing & Valuation
  4. Option Pricing Model to Value a Product Patent or Option
Option Pricing Model to Value a Product Patent or Option
  • Option Pricing Model to Value a Product Patent or Option
Originally published: 05/07/2016 09:01
Publication number: ELQ-93403-1
View all versions & Certificate
certified

Option Pricing Model to Value a Product Patent or Option

This program calculates the value ofa product patent or a project as an option

Prof. Aswath Damodaranby Prof. Aswath Damodaran
Professor at NYU Stern School of BusinessFollow 1,091
NYU Stern School of Businesswith NYU Stern School of Business
An Education in PossibleFollow 62
7 reviews961 views|Start the discussion!|Bookmark download for free
evaluationproductfinancepricingpatentoption
Description
The user has to input the following variables
1. Present value of net cashflows from taking project now.
2. Variance in the present value, as a function of environmental and technical changes.
3. Present value of the cost of developing the product/project for commerical use.
4. Riskless interest rate that corresponds to length of the product patent.
5. Length of the product patent / rights to the project.
6. Expected annual after-tax cashflow from project after it is developed.

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School

This Best Practice includes
1 Excel Model

Prof. Aswath Damodaran offers you this Best Practice for free!

download for free

Add to bookmarks

Discuss

Further information

Output:
- Value of the product patent/project right

Assumptions
1. All the assumptions underlying the Black-Scholes model apply
2. The current value of the project and the variance in this value are known.


4.6 / 5 (7 votes)

please wait...