A Case Study of Estimation of Equity Incentive Expenses for Innovative Pharmaceutical Companies
Estimating share-based payment expenses for high-tech innovative enterprises poses significant challenges.Firstly,it's difficult to choose a reasonable valuation method.Secondly,the equity structure is usually complex,involving multiple rounds of preferred stock investments from external sources and non-standardized stock incentive plans internally,encompassing a series of intricate contractual terms that are interrelated.The paper takes innovative pharmaceutical companies as an example.The main approach involves using a binomial option pricing model to estimate share-based payment expenses related to employee stock options.Within this primary methodological framework,the decision tree method is used to assess enterprise value,and an enterprise value allocation model is applied to determine the value of preferred and common stocks.This paper presents a complete appraisal approach and model through case studies,demonstrating novelty,with the hope of providing practical insights for relevant professionals.
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