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Option of switching an investment project into an agribusiness project.

Year of publication: 2,006 Publication: Nova Lima:  Fundação Dom Cabral,  2006.  (Caderno de Ideias ; CI0607) Pagination: 24 p. Authors: GONÇALVES, Danilo Sampaio;  BRASIL, Haroldo Guimarães;  SOUZA NETO, José Antônio. Type of Publication: Idea Workbook Main Author: Gonçalves, Danilo Sampaio Other Authors: GONÇALVES, Danilo Sampaio;  BRASIL, Haroldo Guimarães;  SOUZA NETO, José Antônio. Summary: In this article we discuss the application of real options theory to analyze an agribusiness investment project. Traditional analyses, using present value of a projected cash flow, cannot respond satisfactorily to the uncertainties of the environment. The theory of real options complements traditional analysis when assessing the flexibilities that permeate such investment projects. Next, we proceed to study the switch option of an ethanol manufacturing project to a flexible be produced. For this purpose, we utilized the
tools found in the quadrinomial model. The result obtained is the calculation of the value of the switch option, which increases the value of the non flexible project. In accordance with the theory of real options, acquiring operational flexibility increases the value of the project studied. Language: Inglês Reference Number: 658 G635o 2006