IMPLEMENTATION OF REAL OPTIONS TO THE VALUATION OF THE COVID-19 VACCINE PROCUREMENT PROJECT IN INDONESIA

• Main Author: Hamida, Khalisha
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/54922
• Institution: Institut Teknologi Bandung

COVID-19 (coronavirus disease 2019) is a new type of coronavirus, Sars-CoV-2. First appeared in Indonesia on March 2, 2020. People infected with this virus continue to increase every day and have not subsided even though it has been going on for fifteen months. WHO (World Health Organization) officially declared COVID-19 as a global pandemic due to the rapid increase in infected population and the high death rate in the world. World scientists are trying to develop a vaccine to tackle COVID-19. Indonesia is one of the countries that has vaccinated one way by importing vaccines from world vaccine producers. Each country can only order a limited number of vaccines because the number of vaccines does not yet meet the needs of the whole world population. The Indonesian Ministry of Health is the main agency authorized to deal with COVID-19, including vaccination activities. The Indonesian Ministry of Health has created an initial vaccination strategy to achieve herd immunity and will be completed in the first quarter of 2022. This final project assumes that there is a second party company authorized as the project owner to manage, sell and distribute the COVID-19 vaccine which has been received by Indonesia through policies and cooperation that have been handled by the Indonesian Ministry of Health. The project value is calculated using the DCF method. However, the DCF method does not have managerial flexibility that the project value obtained is not optimal. Therefore, the real option is applied, which includes an element of uncertainty in the value of the implemented project, to gain a strategy that produces profitable net present value (NPV). Project volatility is calculated using Monte Carlo simulations as an element of market uncertainty. The modified version of the Brandao, Dyer, and Hahn Binomial Lattice method is used in the calculation of the real options to obtain the expected project value. The real options used are buyout options, divest options, or continuing the project. Based on the calculations, it is found that the application of the real option increases the NPV of the project obtained.