Optional Approach for Investment Projects Valuation and It’s Appliance to the Project of Producing Healthy Organic Food
Main Article Content
Abstract
The aim of this paper is to present the appliance possibilities of optional approach to investment projects valuation, as well as new theoretical and methodological framework of investment analysis, to project of producing and selling healthy organic food. Unlike traditional methods of project valuation, this new, contemporary approach provides valuation of management flexibility and possibility of adjustment (correction of previous decisions) in accordance to the market conditions. In light of dramatic changes and increasing risks and uncertainty in investment decision‐making, it is necessary to complete the traditional approach by optional, in order to make more rational allocation of resources. The necessity of using optional approach is reflected from the fact that the results of projects valuation according to the traditional and modern approach may be contradictory. This paper presents the Black‐Scholes and binomial option pricing model, and appliance of option valuation is shown on the project of producing and selling healthy organic food and healthy food restaurant as an extension activity. While traditional methods of valuating investment projects valuated the project of producing healthy organic food as unprofitable, the optional approach shows that this project is acceptable, which confirms the importance of this approach.
Article Details
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Once the manuscript is accepted for publication, authors shall transfer the copyright to the publisher. If the submitted manuscript is not accepted for printing by the journal, the authors shall retain all their rights. The following rights on the manuscript are transferred to the publisher, including any supplementary materials and any parts, extracts or elements of the manuscript:
- the right to reproduce and distribute the manuscript in printed form, including print-on-demand;
- the right to print prepublications, reprints and special editions of the manuscript;
- the right to translate the manuscript into other languages;
- the right to reproduce the manuscript using photomechanical or similar means including, but not limited to photocopy, and the right to distribute these copies;
- the right to reproduce and distribute the manuscript electronically or optically using and all data carriers or storage media, and especially in machine readable/digitalized form on data carriers such as hard drive, CD-ROM, DVD, Blu-ray Disc (BD), Mini Disc, data tapes, and the right to reproduce and distribute the article via these data carriers;
- the right to store the manuscript in databases, including online databases, as well as the right to transmit the manuscript in all technical systems and modes;
- the right to make the manuscript available to the public or to closed user groups on individual demand, for use on monitors or other readers (including e-books), and in printable form for the user, either via the Internet, online service, or via internal or external networks.
References
http://finance.wharton.upenn.edu/~benninga/mma/MiER63.pdf, (accessed 03 June 2010);
Bodie, Z.et al. (2006): Počela ulaganja, Mate, Zagreb;
Brzaković, T. (2007): Tržište kapitala‐ teorija i praksa, Čugura print, Beograd;
Damodaran, A. (1999): Applied corporate finance, John Wiley & Sons, New York;
Damodaran, A.: Option Pricing Theory and Applications,
http://pages.stern.nyu.edu/~adamodar/pdfiles/eqnotes/option.pdf, (accessed 08 May 2010);
Damodaran, A.: Real options: Facts and fantasy,
http://pages.stern.nyu.edu/~adamodar/pdfiles/execval/optval.pdf, (accessed, 03 June 2010);
Damodaran, A.: The promise and perile of real options,
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1295849, (accessed 03 June 2010);
Orsag, S. (2003): Vrijednosni papiri, Revicon, Sarajevo;
Orsag, S. (2006): Izvedenice, Hufa, Zagreb;
Rovčanin, A. (2000): Savremene metode ocjene efikasnosti investicija, Ekonomski fakultet u Sarajevu,
Sarajevo;
Rovčanin, A. (2006): Upravljanje finansijama, Ekonomski fakultet u Sarajevu, Sarajevo;
Rovčanin, A. (2005): Opcioni pristup vrednovanju kapitalnih ulaganja, Ekonomski pregled, Zagreb.
Šoškić, D.(2001): Hartije od vrednosti: upravljanje portfoliom i investicioni fondovi, Ekonomski fakultet
Beograd, Beograd;
www.real‐options.de, (accessed 08 May, 2010);
www.damodaran.com, (accessed 03 June, 2010).
http://www.optionseducation.org/advanced/volatility_greeks.jsp
(accessed 1 September 2010)
http://www.investopedia.com/terms/b/blackscholes.asp (accessed 01 Septmeber 2010)
http://www.hoadley.net/options/BS.htm (accessed 5 September, 2010)
http://pages.stern.nyu.edu/~adamodar/ (accessed 5 September, 2010)
http://www.bplans.com/organic_restaurant_business_plan/market_analysis_summary_fc.cfm
(accessed 5 September, 2010)