engleski

Investment analysis of plum brandy production – Methodology approach

This paper was aimed to stress the modern methods of investment analysis based on valuation of opportunities that emerges during the project’ s life. A good project evaluation methodology should incorporate in a quantitative way all the three characteristics: irreversibility, uncertainty and flexibility. Traditional (conventional) appraisal methodology for project investment can hardly incorporate the above three characteristics because it assumes an expected scenario of cash flows and supposes management’ s passive commitment to a certain static operating strategy. In this respect, author sets the presumption that traditional methods of investment analysis can undervalue investment project because they do not take in consideration an optional value (potential) of investment. Therefore, traditional investment appraisal should be completed with Real Option (RO) evaluation what can be defined as the right, but not the obligation, to undertake some capital investment or make any other business decision.On example of plum production author showed that some projects with negative traditional investment appraisal can be accepted if have some potential (optional) value.

real option; plum production; investment analysis

nije evidentirano