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RISK CONSIDERATION IN THE INVESTMENT PLAN OF CREATING A VINEYARD
The paper is focused on creation and evaluation of the investment project of establishing vineyard with risk taken into consideration via a simulation model. The basis of this work was the creation of a multi period balance model and formation of different variants of the individual projects which differ in production volume and mean of financing. The model accepts to full extent initial decisions on the supposed yields, selling prices and the way of depreciation of vineyard and its fencing. In other parts of the model, the investor introduces only prices per unit of labour to services such as pre-agglomeration of land, vineyard plantation and its cultivation in different years, fencing and supporting construction and all other calculations are done automatically representing the intermediate results and model outputs. Part of the model covering the loan gives information on total initial costs of the projects including working capital and total capital costs. They are financed from equity, loans, and subsidies.
The main evaluation criterion of the deterministic calculations was the net present value which takes into consideration the time factor and belongs among the dynamic methods. By means of sensitivity and simulation analysis is possible to identify an appropriate investment strategy under the risk conditions. The risk factors, which were identified by sensitivity analysis, are defined as random variables with certain probability distribution. Critical values of target criterion give information value which we can expect with willingness to tolerate given risk quantification. The spreadsheet model allows to simulate various financial investment and credit and depreciation procedures.
The multi-period model allows for the assessment of individual investment intentions through the Net Present Value indicator and through the sensitivity and simulation analysis to identify the most appropriate investment strategy under risk conditions. The risk factors, which were identified by sensitivity analysis are defined as random variables with certain probability distribution in stochastic model. Critical values of target criterion give information which value can we expect with willingness to tolerate given risk quantification. The multi-period balance model can also be transformed into an optimization model by a suitable adjustment.
Key words: investment decision making, net present value, risk analysis, modeling analysis, risk, uncertainty, viticulture, investment project.
doi: 10.33245/2310-9262-2019-148-1-100-110
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