Investment analysis of deferring a farmer owned ethanol plant: using real options

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dc.contributor.advisor Robert Jolly
dc.contributor.author Shunmugavelu, Ramanathan
dc.contributor.department Economics
dc.date 2018-08-22T15:37:12.000
dc.date.accessioned 2020-06-30T07:58:22Z
dc.date.available 2020-06-30T07:58:22Z
dc.date.copyright Wed Jan 01 00:00:00 UTC 2003
dc.date.issued 2003-01-01
dc.description.abstract <p>A farmers owned value-added (FOVA) business is often subject to changes in the political situations. So an investment analysis tool that incorporates uncertainty, such as real options is more appropriate. Application of real options is limited in FOVA businesses. In this thesis, the concept of real options is applied under the framework of a farmer owned ethanol plant. The impact of changes in the policy or political situations on ethanol industry is well known. Farmer investors that are currently interested in investing in an ethanol plant should decide whether it is worthwhile to invest now or wait for a year to understand the status of the Renewable Fuels Standard, a major pending policy. In order to make a decision, option values are estimated over a one year period using explicit finite difference method. The findings suggest that the option value is more than the net present value of the ethanol plant. Hence it is worthwhile to wait for one more year.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/rtd/17197/
dc.identifier.articleid 18196
dc.identifier.contextkey 8117539
dc.identifier.doi https://doi.org/10.31274/rtd-180813-7884
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath rtd/17197
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/71019
dc.language.iso en
dc.source.bitstream archive/lib.dr.iastate.edu/rtd/17197/ISU_1504827.pdf|||Fri Jan 14 21:18:14 UTC 2022
dc.subject.disciplines Agricultural and Resource Economics
dc.subject.disciplines Agricultural Economics
dc.subject.disciplines Economics
dc.subject.keywords Economics
dc.title Investment analysis of deferring a farmer owned ethanol plant: using real options
dc.type article
dc.type.genre thesis
dspace.entity.type Publication
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
thesis.degree.level thesis
thesis.degree.name Master of Science
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