An investment valuation and risk assessment of high-density sweet cherry orchards Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/fb494c186

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  • A supply and demand model for the sweet cherry industry in Wasco County, Oregon and two investment valuation models are used to value and assess the risk of investments in high-density sweet cherry orchard establishment and production from the producer perspective. The supply and demand estimation finds the cherry price and cherry supply relationship in Wasco County to be significant and negative. A discounted cash flow (DCF) valuation model and a real options valuation model are used to value four investment scenarios. The inverse price supply relationship is modeled stochastically using Monte Carlo Simulation producing a distribution of investment values that allow for risk to be assessed. The DCF valuation model values a fixed investment in orchard establishment, while the real options valuation model values the option to defer making an investment in orchard establishment. The results of the DCF valuation model using the stochastic process indicate that price variables dominate the price yield tradeoff and drive mean investment value and investment risk. The real options valuation finds that investments that are currently not profitable gain value from the deferral option. Whereas currently profitable investments may gain value depending on how large their current value is relative to the deferral cost.
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