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Case

Reference no. UVA-QA-0581

Subject category: Case Method and Specialist Management Disciplines

Authors: Samuel E Bodily (Darden School of Business, University of Virginia)

Published by: Darden Business Publishing

Originally published in: 2001

Version: 25 March 2014

Revision date: 16-Apr-2014

Length: 7 pages

Data source: Published sources

Topics: Option valuation; Simulation; Valuation; Decision trees; Entrepreneurship and innovation; Venture capital; Finance; e-Business; Real options; Management science; Decision analysis; Real options/hedging; Quantitative analysis

Share a link: https://casecent.re/p/1474

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Abstract

An angel/venture capitalist could invest in an Internet sheet-music publishing start-up. The chance of success multiplied by the value, if successful, suggests that this isn't a good investment. Nevertheless, several friends suggest the optionality present in the venture: abort an unsuccessful website and sell the technology; switch the technology if the website is good, expand, buyout. Decision trees and Monte Carlo simulations are used to value these options, which make the opportunity look very attractive.

Industry:

Technology