Basedonthisanalysis,ifnothingchanges,wewouldexpect
Avonextobeworthmoreasacommercialproductthanasa
patent nineyears fromnow,which wouldalsothenbe the
optimal time to commercially develop the product.
Valuing a Firm with Patents
Ifthepatentsownedbyafirmcanbevaluedasoptions,how
canthisestimatebeincorporatedintofirmvalue?Thevalue
ofa firmthat derivesits valueprimarilyfrom commercial
products that emerge from its patents canbe written as a
function of three variables.
1.Thecashflowsitderivesfrompatentsthatithasalready
converted into commercial products.
2.Thevalueofthepatentsthatitalreadypossessesthathave
not been commercially developed.