Including Risk in Economic Feasibility Analyses: The Case of Ethanol Production in Texas

James Richardson (), Brian K. Herbst, Joe Outlaw and Gill, Robert Chope,

Journal of Agribusiness, 2007, vol. 25, issue 2, 18

Abstract: The widespread use of personal computers and spreadsheet models for feasibility studies makes risk-based Monte Carlo simulation analysis of proposed investments a relatively simple task. Add-in simulation packages for Microsoft® Excel can be used to make spreadsheet models stochastic. Rather than basing investment decisions on point estimates, investors can easily estimate the implied distributions of returns for uncertain investments and calculate the risk of an investment as well as the probability of success. The benefits of using Monte Carlo simulation to analyze a risky investment are demonstrated using an ethanol plant as an example.

Keywords: Agribusiness; Research and Development/Tech Change/Emerging Technologies (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:jloagb:62291

DOI: 10.22004/ag.econ.62291

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