Journal Press India^®

Author Details ( * ) denotes Corresponding author

The objective in the paper is to value a firm in distress which is struggling to survive and continue its operations, unable to meet its debt obligations, and making losses so that it has a negative book value. The paper has taken a listed Indian firm which is in operation since a decade called Jet Airways. The paper looks at different methods to value this company, the most prominent being the real option approach to valuation. Finally, a comparison of different valuation methods was done with the real company price. The Discounted Cash Flow method tends to overvalue the price of a distressed firm. Real option method gives us a much smaller intrinsic price which is even close to the market price of the share.

Keywords

Jet Airways, Valuation, Option Pricing Valuation, Relative Valuation.

1. Alleman, J. (2002). A new view of telecommunications economics. Telecommunications Policy, 26, 87-92.
2. Benaroch, M., & Kauffman, R. J. (1999). A Case for Using Real Options Pricing Analysis To Evaluate Information Technology Project Investments. Information Systems Research, 10(1), 70-86.
3. Brandao, L. E., Dyer, J. S., & Hahn, W. J. (2005, June). Using Binomial Trees To Solve Real-Option Valuation Problems. Decision Analysis, 2(2), 69-88.
4. Chang, J., Hung, M. W., & Tsai, F. (2005). Valuation of intellectual property: A Real option approach. Journal of Intellectual Capital, 6(3), 339-356.
5. Damodaran, A. (2000). The promise of real options. Journal of Applied Corporate Finance, 13, 29-43.
6. Herath, H. S., & Bremser, W. G. (2005). Real-option valuation of research and development investments: Implications for performance measurement. Managerial Auditing Journal, 20(1), 55-72.
7. Kemma, A. G. (1993, Autumn). Case Studies on Real Options. Financial Management, 22(3), 259-270
8. Leslie, K. J., & Michaels, M. P. (1997). The real power of real options. The McKinsey Quarterly, 3, 4-23.