Multinational Enterprise Investment Strategy Evaluation - Option to Growth or Option to Abandon of Binomial Options Application

This paper aims to consider the changes in the international investment environment and bring high uncertainty to multinational enterprises. Therefore, multinational enterprises invest in overseas markets according to the degree of capital expenditure, and adopt progressive investment. The order of capital expenditure (low to high) is divided into four stages, the first stage of export or authorization, and the second stage of opening the franchise chain, the third stage of joint venture, the fourth stage of acquisition or the establishment of foreign branch. Under the uncertainty of investment cash flow and exchange rate changes, use the option to growth or option to abandon of binomial options evaluation method to predict the four-stage cash flow and exchange rate changes. In view of the four stages of multinational enterprises' orderly capital costs (low to high), each stage selects the best decision, uses the option to growth to invest capital or option to abandon to give up the investment. This paper constructs a dynamic and successive investment binomial options decision model, estimates the equity value of overseas investment of multinational enterprises, and conducts investment strategy feasibility assessment. And compare the traditional investment decision NPV method, providing managers with a more flexible decision-making thinking mode for multinational enterprise investment.