Target Enterprise Value Econometric Model Constructed in M & A Related to Real Option

The measurement involved value assessment could amend the shortcoming of quality analysis in target enterprise selection and improve the accuracy in choice process. Compared with the five current models used in target enterprise value measure, the traditional cash flow method has a theoretical advance. There are two parts consisting target enterprise value in M&A. One part is from the discounted value of future cash flows using traditional discounted cash flow method, and the other part is the possible real option value. According to that, target enterprise valuable econometric model corresponding to real option is constructed in the process of M&A. During value measurement process, we focus on researching the account of option value. Combining real option method and traditional cash flow method in target enterprise value measure will increase the rational in practice and better estimate the merger incomes.