Real Option and Investment in the UK - Research Proposal Example

Cover Page ABC REAL OPTION, INVESTMENT STRATEGY AND PROCESS IN UK Dissertation Proposal ID: X Y Z 2 Date: Department: Financial Management Degree: Tentative Title: Real Option, Investment Strategy And Process In UK Committee Members: Signature Date Director Signature Date Member Signature Date Member Approved by Program Coordinator (if appropriate) Signature Date Approved by Department Chairpersons Signature Date Date Received by the Graduate Dean of Director Conceptual Background of the Dissertation Proposal My proposed Dissertation Proposal is Real Option, Investment Strategy And Process In UK. There is always some probability that somebody at that company will do something unexpectedly brilliant or unbelievably stupid that will dramatically change the value of that business. Real option are those strategic elements in investment that help creating flexibility of operation or that have the potentials of generating profitable opportunities in the future for the firm. Real options provide discretion to the managers to take certain investment decision without any obligation for a given price. We clarify that real options are not confined with real assets only. Patent, R&D, Brand etc. are examples of assets that save a value to the owner. The capital investments should be viewed as a strategic investment that incorporates the real options. Valuing a real option is a real challenge for the managers in UK 3. Aim And Objectives: 1) How UK Investors can use the concept of "real options" to explain part of the difference in market value and the intrinsic value as calculated using traditional methods. Real options represent what is possible beyond the current business operations. Investors can ignore real options, try to find real option value for free, or consciously seek out companies that have abundant real option value. 2) Instead of database services (like FT, Routers, and Yahoo) launches a hot new product or service how invests should use Real options 3) Finding some better way for UK investors to get a better handle on how to value such companies 4) How real options in part to explain the gap between how the stock market prices some businesses and the "intrinsic value" for those businesses as calculated by traditional financial analysis, specifically discounted cash flows. Parts of the Proposed Dissertation Proposal The proposed Dissertation should have the following Chapters with contents there by. Acknowledgement: Should mention the contribution of the persons who cooperated this work. Abstract: Should summarise the whole work. PROBLEM STATEMENT [CHAPTER-1:] 1-1 Introduction: This Chapter is dedicated to evaluate investment; initiatives Net Present Value (NPV) and Return on Investment (ROI) are commonly used 4. But sometimes it becomes very difficult to measuring the value of investment for new project or technology due to their wider scope of application. The Projected cash flows seem meager in comparison to the investment required. At the same time discount rate chosen to compensate for the risk is so high, which renders the NPV unpleasant. In this case Real Options Analysis should be a better way to evaluate its adoption in the Investment Strategy and process in UK. 1-2 Aim & Objective: This subhead should carry the objectives mentioned as in the proposal 1-3 Problem Statement: These subtopics include how to implement investment strategy with cutting-edge financial theory and current best practices of plan sponsors and investment managers. The professionals' read about current practical and theoretical twists and turns in asset allocation, risk management, and performance evaluation and implementation. We describe how investment process of United Kingdom would be fruitful 5. 1-4. Research Question and Objectives This study is designed to answer the following research question. What factors most influence to establish whether Investment Strategy and Process is effective, cost effective, acceptable, and to understand the potential barriers to implementing in view of Real Option The answer to this question will enable financial managers to organise the workplace environment toward greater Real Options and increased productive output. Four research objectives are listed below. 1. To determine what factors most influence Investment Strategy and Process for Investors decision making. 2. To determine whether those factors are consistent over time cost effectively in UK. 3. To identify what Real Options considered most appropriate to increase process and acceptability of a particular Investment Strategy and Process. 4. To ascertain whether Real Options and Strategic factors influence the investors to explore a speedy drive in UK. RELEVANT LITERATURE REVIEW [CHAPTER-2] 2-1 Overview of the Topic This literature review includes writings, research and scholarly opinion concerning the Real Options, Investment Strategy and process. UK financial management and design and motivate their process relate to Investment service and the overall success of their performance. It provides the background needed for evaluation of what factors most significantly influence organisational success6. The views and opinions of contemporary management writers concerning Real Options, Investment strategies and process are discussed. Together, the historical theories and modern approaches form a solid basis upon which to design a research study to further refine the causal relationships affecting workplace process. 2-2. Scope and Limitations of this Review The writings included in this review reflect authors and researchers interested in the description, measurement and evaluation of Real Options and its resultant effects in the organization. The report focuses on studies of the dimensions of Investment needs, Investors behaviors, how Investment strategy is measured and attributed by others, and the effect of Investment Strategy and Process upon organisational effectiveness and process. Special emphasis is placed upon the effect of managerial behaviors on process and quality initiatives in the organisation 7. Both historic and contemporary writings are reviewed with extra attention given to those authors whose theories have gained popular acceptance or have been widely replicated. With massive quantities of literature concerning Real Options, Investment Strategy and Process this review is limited to the most substantiated theories and accepted principles. It is but a sampling of the mass of Investment literature. The underlying assumptions for making these limiting selections is that the financial managers and consultants involved in this study will most likely not use factor terms derived from obscure management theories or drawn from lesser known writers with unique, investment thoughts on organisational success and investors motivations. 2-3. Organization of the Literature Review The discussion portion of this review is organized into six sections. The first section describes historical and contemporary studies of Investment criteria and the attribution of Real Options to persons in management and supervisory positions. It centers on how investment actions are classified and how both managers and consultants and higher-level Investment Strategy attribute Real Options Analysis8. The second section reviews how Strategic actions have been evaluated and assessed in the past and how those factors are related to organisational performance. It also looks at the role of leaders in attaining productive results within their organizations. Prescriptions for effective Investment Strategy and Process are presented, as are methods used to evaluate the strategy overall influence on the organization. A connection is made to strategic actions and organisational success. The third section reviews the thoughts of more contemporary writers on effective Investment Strategy and Process and its impact within organisations. The writers selected represent a cross-section of management gurus, past and present organisational leaders and other mainstream management thinkers. Included in this section is a presentation of the prescriptions of popular Investment writers concerning process actions leading to overall success. The fourth section discusses motivational factors, which influence Investment Strategy and Process and Investment success. Classical theories of Real Options and enduring approaches to management are highlighted because of their relevance to the process factors identified by the preliminary surveys. The fifth section reviews the results of a recent study of what Investment Strategy and Process employed in Top UK Companies9. This study ranked investment factors associated with process in the public sector environment. Its findings will help and guide the interpretation and analysis of the data from this research, and will provide a basis for comparison of the results. Finally, a summary section ties together the philosophies, concepts, evidence, theories and practices discussed in this review. This section identifies how the existing theories account for causal relationships between Real Options, Investment Strategy and Process and overall process and organisational success. CHAPTER-3: METHODOLOGY 3-1 Overview Described below is the sampling design, the research design, data collection methods and data analysis techniques used during this project. Schon's new educational paradigm teaches us how to reflect-in-action. It has organised into four themes: (a) concept of inquiry as reflection-in-action, (b) constructing a dialectic in organisations, (c) practice of learning and (d) knowledge must be embodied in direct action. 3-2 Research Approach In spite of the predictions of these early papers, listings on the exchanges with the most stringent disclosure requirements, the LSE and NYSE and Nasdaq, accelerated during the 1990s. As a result, a series of papers by Murray Carlson et al (2006), Ilan Cooper (2006), Suresh M. Sundaresan (2003), Thomas H. Noe et al (2003), Cantale (1996), Fuerst (1998) and Moel (1999) developed analytical models to rationalise firms would, in fact, optimally choose to list on markets with higher levels of information disclosure and why investors would value such firms higher10. The common elements of these analytical models are that they assume some form of information asymmetry or market incompleteness (Merton, 1987) and that a signaling equilibrium is established in which firms try to communicate their private information regarding their quality to outside investors by listing their shares in overseas markets. The models leads to testable hypotheses relating disclosure levels to firm- and country-specific factors and the Research Gaps are identified as - Why the investors try to find real option value for free, or consciously seek out companies that have abundant real option value. Instead of database services (like FT, Routers, and Yahoo) how investors should make investment decision and which tools may use. For new and innovative initiatives, which would be the better way for UK investors to get a better, handle. How the stock market prices some businesses and the "intrinsic value" for those businesses as calculated by traditional financial analysis, specifically discounted cash flows. 3-3 Research Design 1. Initial Exploratory Surveys The survey instruments contained four open-ended questions to solicit answers from state workers concerning factors influencing their Investment Strategy and Process. Since prevailing political, social and economic conditions could very likely impact the responses to the survey questions, the research was conducted over a period of two years. It is assumed that unique ambient conditions did not unduly bias the fundamental results of each year's surveys11. The type of data collected in these surveys is nominal in that it consists of unstructured responses to open-ended questions. Open-ended questions were used because specific work place factors had not yet been identified for this population. Also, a hypothesis related to what factors most influence work place process had not yet been formed. Instead of a hypothesis, a research question guided the preliminary study: What factors most affect Investment Strategy and Process To answer the research question four questions should be developed for the survey. 3-4 Consent Procedures The participants without questions or concerns accepted this direction statement. When asked if the directions and purpose of the survey were clearly understood, no participant ever questioned or expressed doubt about understanding. The uniformity of the responses and appropriateness of the responses serves to validate this assumption12. 3-5 Instrumentation 1. What factors most influence Investment Strategy and Process for Investors decision-making The respondents to focus only on recent negative experiences or to think in purely negative terms listed this question first to avoid a tendency. 2. Whether those factors are consistent over time cost effectively This item was selected to prepare the respondent to think of job irritants as a separate issue from other factors, which more tangibly limit process. Such irritants may differ from factors, which more directly influence public acceptability. 3. What Real Options considered most appropriate to increase process and acceptability of a particular Investment Strategy and Process This question was designed to arrive at factors, which together answer the primary research question. It was worded broadly to encourage the respondents to think beyond their immediate work environment, and to consider areas often considered by government workers to be unchangeable: policies, procedures and directives13. 4. Whether Real Options and Strategic factors influence the investors to explore a speedy drive The respondent phrased this question this way to eliminate feelings of powerlessness or helplessness. The answers were expected to be less constrained by artificial or assumed limitations imposed by the employee's job position. RESULT & FINDINGS [CHAPTER 4] 4-1 Understanding the scope of Investment: Planning It has been estimated the size of the investment in terms of man power planning depending on no of modules their screens, reports, queries, process programs based on the survey 4-2 Investment Performance evaluation of UK: This subhead involves entrepreneurs in the United Kingdom will develop the specific guidelines unique cooperatively. The entrepreneurs review the performance. 4-3 Recommendations: This Chapter should recommend the conditions, which could accelerate the investment strategy 5-0 Conclusions: From the literature review, issues were raised that provided great insight into potential problems and barriers when exploring the Real Option, Investment Strategy. Firstly it s important to raise awareness about Real Option, Investment Strategy and process to at risks groups, improve access for investors14. Bibliography Glossary Appendix A. Figure -1 Figure -2 Appendix B. Tables Table -1 Table -2 Table -3 Few of Recommended Study Materials: 1. Ilan Cooper (2006), Asset Pricing Implications of Non-convex Adjustment Costs and Irreversibility of Investment, THE JOURNAL OF FINANCE. VOL. LXI, NO. 1, FEBRUARY 2006. 2. Murray Carlson et al (2006), Corporate Investment And Asset Price Dynamics: Implications For SEO Event Studies And Long-Run Performance, The Journal Of Finance, Vol. LXI, No. 3, June 2006. 3. Thomas H. Noe et al (2003), Corporate Financing: An Article Agent-Based Analysis The Journal Of Finance, Vol. LVIII, No. 3 June 2003 4. Suresh M. Sundaresan (2003) Continuous-Time Methods In Finance: A Review And An Assessment, The Journal Of Finance Vol. LV, No. 4 August 2000 5. Hill, R. A., Financial Management: An Active Approach (Part A), Leicester Finance Study Group, 2006. 6. Hill, R. A., Financial Management: An Active Approach (Part B), Leicester Finance Study Group, 2007. 7. Pandey, I. M. Financial Management, 8th ed. 2001, Vikas Publishing House Pvt. Ltd, 8. Khan. M. Y. & Jain P. K.," Financial Management", 2nd ed. 1999, Tata McGraw-hill Publishing Company Limited, New Delhi. 9. Introducing Compliance Management System Generation, Investment Goals and Decision Criteria, Chapter 14, 2007, DF Institute available at: < http://www.dearborn.com/download/Invanalysis/Chapter14Outline.pdf > 10. Margolis, D. (2007), Corporate Finance, Value Enhancement tools, Chapter 32, available at: < http://pages.stern.nyu.edu/adamodar/pdfiles/valn2ed/ch32.pdf > 11. Eric Berkman (2004). How Effective Project Management Got JP Morgan a Secure Extranet, available at: < http://www.cio.com/article/30487/How_Effective_Project_Management_Got_JP_Morgan_a_Secure_Extranet > 12. Michael L. Barnett (2005), Paying Attention To Real Option, Department of Management & Organization, Collage of Business Administration, University of South Florida, available at: < http://www.coba.usf.edu/barnett/R&DMGMT2005.pdf > 13. Milind Patil (2004), Investment in RFID: A Real Option Approach, available at: < http://www.patni.com/resource-center/collateral/RFID/tp_RFID_Real-options-approach.pdf > 14. Zeke Ashton (2001), Putting "Real Options" to Work, Legal Information 1995-2007 The Motley Fool, available at: < http://www.fool.com/research/2001/foolsden010130.htm > 15. Richard de Neufville (2003), Real Option Dealing with Uncertainty, available at: < http://ardent.mit.edu/real_options/Real_opts_papers/delftpaperpublication.pdf > 16. Andrew Milligan, (2006), Global Investment Strategy, Standard Life Investments Standard File Investments UK, available at: < http://uk.standardlifeinvestments.com/content/strategy/global_spotlight/global_archive/patience_paying_dividends_for_uk_investors.html> 17. Circle Peak Capital, Investment Strategy, Newsletter (March 2007) Available at: < http://www.circlepeakcapital.com/investment_strategy.html > Read More