A real options approach to valuing agricultural resource assets under uncertainty: US corn crops

Marcus Smith; Simone Kelly; Ray McNamara

Abstract

Real options are well known for their usefulness in evaluating non-renewable resources. This study derives an asset valuation model using real options methodology to evaluate renewable agriculture investments. The model calculates the value of an investment project as well as computing the critical strike prices at which it becomes optimal to exercise various options over the asset, including when to invest (commence or recommission operations), disinvest (temporarily decommission or delay operations) or abandon the asset altogether. The model incorporates the real options approach into a traditional valuation framework to develop an objective means for calculating a risk-adjusted discount rate applicable to traditional discounted cash flow valuations.

Original language	English
Pages	1-1
Number of pages	1
Publication status	Published - 2015
Event	27th Asian-Pacific Conference on International Accounting Issues: Global Perspectives of Accounting Information in the 21st Century - Gold Coast, Australia Duration: 1 Nov 2015 → 4 Nov 2015 Conference number: 22nd http://www.apconference.org/

Conference

Conference	27th Asian-Pacific Conference on International Accounting Issues
Country/Territory	Australia
City	Gold Coast
Period	1/11/15 → 4/11/15
Internet address	http://www.apconference.org/

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

https://fresnostate.app.box.com/27thProgramandProceedings

Cite this

Smith, M., Kelly, S., & McNamara, R. (2015). A real options approach to valuing agricultural resource assets under uncertainty: US corn crops. 1-1. Abstract from 27th Asian-Pacific Conference on International Accounting Issues, Gold Coast, Australia. https://fresnostate.app.box.com/27thProgramandProceedings

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Smith, M, Kelly, S & McNamara, R 2015, 'A real options approach to valuing agricultural resource assets under uncertainty: US corn crops', 27th Asian-Pacific Conference on International Accounting Issues, Gold Coast, Australia, 1/11/15 - 4/11/15 pp. 1-1. <https://fresnostate.app.box.com/27thProgramandProceedings >

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N2 - Real options are well known for their usefulness in evaluating non-renewable resources. This study derives an asset valuation model using real options methodology to evaluate renewable agriculture investments. The model calculates the value of an investment project as well as computing the critical strike prices at which it becomes optimal to exercise various options over the asset, including when to invest (commence or recommission operations), disinvest (temporarily decommission or delay operations) or abandon the asset altogether. The model incorporates the real options approach into a traditional valuation framework to develop an objective means for calculating a risk-adjusted discount rate applicable to traditional discounted cash flow valuations.

AB - Real options are well known for their usefulness in evaluating non-renewable resources. This study derives an asset valuation model using real options methodology to evaluate renewable agriculture investments. The model calculates the value of an investment project as well as computing the critical strike prices at which it becomes optimal to exercise various options over the asset, including when to invest (commence or recommission operations), disinvest (temporarily decommission or delay operations) or abandon the asset altogether. The model incorporates the real options approach into a traditional valuation framework to develop an objective means for calculating a risk-adjusted discount rate applicable to traditional discounted cash flow valuations.

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