scholarly journals The Financial Valuation Risk in Pepper Production: The Use of Decoupled Net Present Value

Mathematics ◽  
2020 ◽  
Vol 9 (1) ◽  
pp. 13
Author(s):  
Josefa López-Marín ◽  
Amparo Gálvez ◽  
Francisco M. del Amor ◽  
Jose M. Brotons
Keyword(s):  
Interest Rates ◽  
Risk Evaluation ◽  
Net Present Value ◽  
Cash Flows ◽  
Present Value ◽  
Financial Valuation ◽  
Production Activity ◽  
Quality Water ◽  
Future Cash Flows ◽  
Over Time

Greenhouse peppers are one of the most important crops globally. However, as in any production activity, especially agricultural, they are subject to important risk factors such as price fluctuations, pests, or the use of bad quality water. This article aims to evaluate the viability of these types of crops by using discounted cash flows. Risk evaluation has been carried out through the analysis of pepper plantations for 2016 and 2017. The traditional application of this tool has significant limitations, such as the discount rate to be used or the estimation of future cash flows. However, by using discount functions that decrease over time in combination with decoupled net present value, these limitations are expected to improve. The use of decoupled net present value has permitted an increase in the accuracy and quantification of risks, isolating the main risks such as price drops (EUR 3720 ha−1 year−1) and structural risks (EUR 1622 € ha−1 year−1). The use of decreasing discount functions has permitted a more realistic investment estimation. Finally, the sensitivity analysis shows that decoupled net present value (DNPV) is little affected by changes in interest rates in contrast to traditional net present value (NPV).

A POSSIBILISTIC APPROACH TO INVESTMENT DECISION MAKING

2013 ◽  
Vol 21 (02) ◽  
pp. 201-221 ◽  
Author(s):  
LUCA ANZILLI
Keyword(s):  
Net Present Value ◽  
Fuzzy Numbers ◽  
Investment Decision ◽  
Investment Decisions ◽  
Cash Flows ◽  
Mean Value ◽  
Present Value ◽  
Adaptive Fuzzy ◽  
Investment Decision Making ◽  
Future Cash Flows

The concept of possibilistic mean value and variance of fuzzy numbers has been applied to investment decisions by using a nonlinear type of fuzzy numbers called adaptive fuzzy numbers. In this paper, by extending the notion of adaptive fuzzy number, we propose a more flexible methodology. Our aim is to allow decision maker more flexibility in dealing with ambiguity and uncertainty. To illustrate the use of our approach and its ability in dealing with ambiguity and imprecision we analyze, as an application, the fuzzy net present value of future cash flows and give some numerical results.

scholarly journals "What If" Analyses in Investment Decision Making

2012 ◽  
Vol 3 (3) ◽  
pp. 5-16
Author(s):  
Katarína Belanová
Keyword(s):  
Decision Making ◽  
Cash Flow ◽  
Net Present Value ◽  
Investment Decision ◽  
Cash Flows ◽  
Present Value ◽  
Discounted Cash Flow ◽  
Basic Approach ◽  
Investment Decision Making ◽  
Future Cash Flows

In general, each project`s value is estimated using a discounted cash flow (DCF) valuation, and the opportunity with the highest value, as measured by the resultant net present value (NPV) will be selected. The problem with such NPV estimates is that they depend on projected future cash flows. If there are errors in those projections, then estimated net present values can be misleading (a forecasting risk). Basic approach to evaluating cash flow and NPV estimates involves asking “what – if” questions. Accordingly, the paper discusses some organized way s of going about a what – if analysis. Its goal in doing so is to assess the degree of forecasting risk and to identify those elements that are the most critical to the success or failure of an investment. However, as we show in examples, as well as in the practical study, though what – if analysis really allows us to obtain the certain idea of degree of forecasting risk, it does not tell us what to do about the possible errors.

scholarly journals The role of the theory of real choices in the development of financial managers and their decisions in the evaluation of investment decisions

2015 ◽  
Vol 1 (3) ◽  
pp. 278
Author(s):  
Ammar Shihab Ahmed
Keyword(s):  
Real Options ◽  
Net Present Value ◽  
Investment Decisions ◽  
Cash Flows ◽  
Traditional Theory ◽  
Present Value ◽  
Real Options Theory ◽  
Capital Budget ◽  
New Variables ◽  
Future Cash Flows

According to traditional theory of the capital budget, the net present value of future cash flows of the project are discounted at an appropriate discount reflects the degree of volatility in expected future cash flows. If the net present value is positive accept the project and vice versa. And also do not show the actions that can be taken after the acceptance of the project and the commencement of work that could result in an increase or decrease of cash flows, and here highlights the shortcomings with the current environment variables that are complex, leading to a search for new methods in line with these new variables and of the theory real options to evaluate investment decisions and that gives a big role Skilled managers in making capital decisions, which is reflected in the cash flows of investment decisions and future reduction of risk, hence requiring real options theory enjoy CFOs high skills in order to maximize the company to which they belong value, so the company's skilled management is an important tributary of the success of companies that are looking for the competitive advantage that achieve the company's goals and the reduction of risk and the resulting Allatakd and of cash flows that you get as a result of the decisions of its managers.

scholarly journals OPTIMIZED PLANNING OF ASSORTMENT PRODUCTION IN FOREST STANDS

FLORESTA ◽  
2019 ◽  
Vol 49 (4) ◽  
pp. 735
Author(s):  
Luan Demarco Fiorentin ◽  
Julio Eduardo Arce ◽  
Allan Libanio Pelissari ◽  
Rodrigo Otávio Veiga de Miranda ◽  
Thaís Wisniewski de Freitas
Keyword(s):  
Net Present Value ◽  
Production Data ◽  
Timber Production ◽  
Objective Functions ◽  
Present Value ◽  
Homogeneous Production ◽  
Planning Strategies ◽  
Pinus Spp ◽  
Industrial Demand ◽  
Over Time

This study aimed to evaluated two optimized planning strategies and analyze their performance in timber production. Data were obtained in Pinus spp. stands from a forestry company with unbalanced planted area over time. Maximization models of forest production (1) and net present value (2) were formulated and two minimization objective functions of the production deviation (3) and minimum and maximum production oscillation (4) were tested as alternatives to the traditional models. The highest thinning and clearcutting average areas were obtained in strategy 1. Strategies 1 and 2 resulted in the greatest variability of forestry operations. All strategies resulted in the highest timber production for sawn and special sawn wood and the lowest for veneer, while the pulpwood volume was almost constant. Strategies 1 and 2 provided the highest average timber volume and the greatest variability in the production, while strategies 3 and 4 were more efficient, since they supplied the industrial demand with homogeneous production.

scholarly journals Reinvestment Bias When Analyzing Mutually Exclusive Assets

2011 ◽  
Vol 2 (3) ◽  
pp. 71
Author(s):  
Robert J. Sweeney
Keyword(s):  
Net Present Value ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Internal Rate ◽  
Current Period ◽  
The Cost ◽  
Flows Over Time

Capital budgeting decisions generally involve the commitment of resources in the current period to secure positive cash flows over time that generate a rate of return in excess of the cost of the funds invested. The most common techniques used to perform this analysis are the Net Present Value (NPV) and the Internal Rate of Return (IRR).Conceptually, these two techniques are substitutable; i.e. the resulting decision from a NPV analysis is identical to the decision from an IRR analysis. In practice, however, the NPV and the IRR can, on occasion, produce conflicting decisions. Specifically, when analyzing mutually exclusive assets the Net Present Value can support one asset while the Internal Rate of Return supports the other. The purpose of this paper is twofold; first, to highlight structural deficiencies in the conventional application of the NPV and the IRR, and second, to demonstrate a procedure to correct for these structural errors.

scholarly journals Evaluating Financial Viability of Olive Mills Enterprise in Jordan

2014 ◽  
Vol 6 (4) ◽  
pp. 173
Author(s):  
Bassam Aldeseit
Keyword(s):  
Net Present Value ◽  
Cash Flows ◽  
Rate Of Return ◽  
Cost Ratio ◽  
Financial Viability ◽  
Internal Rate Of Return ◽  
Present Value ◽  
Benefit Cost Ratio ◽  
Olive Oil Mills ◽  
Benefit Cost

The main aim of this study was to evaluate financial viability of olive oil mills enterprise. Thirty olive mills were investigated. A questionnaire was designed to obtain information from mills owners. The information obtained was mainly related to costs and returns. Cash flows were derived from costs and returns items of the enterprise. Three main discounted measures of project worth were used; these were Net Present Value (NPV), the Internal Rate of Return (IRR), and the Benefit Cost Ratio (B/C). The results of this study revealed that olive mills could be a viable encouraging, and profitable enterprise because of its capability to generate a highly positive and acceptable NPV (837966.05 JDs). The IRR (85%) and B/C ratio (2.3) values for this enterprise were economically accepted.

A dynamic programming algorithm for optimization of uneven-aged forest stands

1994 ◽  
Vol 24 (9) ◽  
pp. 1758-1765 ◽  
Author(s):  
David J. Anderson ◽  
B. Bruce Bare
Keyword(s):  
Dynamic Programming ◽  
Interest Rates ◽  
Net Present Value ◽  
Initial Conditions ◽  
Dynamic Programming Algorithm ◽  
Basal Area ◽  
Management Problem ◽  
Present Value ◽  
Stand Management ◽  
The Impact

A deterministic dynamic programming formulation of the transition uneven-aged stand management problem is presented. Using a previously published northern hardwoods growth model, a forward recursive, discrete, two-state problem that maximizes the net present value of harvested trees at each stage is developed. State variables represent the total number of trees and the total basal area per acre. A neighborhood storage concept previously published is used to reduce the number of states considered at each stage. Two harvest allocation rules are used to assign the harvested basal area to individual diameter classes. Terminal end point conditions and stage to stage sustainability are not required. Results from four base runs of the model are presented and compared with previously published results. Each run produces significantly different optimal paths, with one showing a higher net present value than any previously published. Sensitivity runs illustrate the impact of changes in interest rates, width of neighborhood storage class, and initial conditions. Dynamic programming offers promise for analyzing uneven-aged stand management problems.

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