A computerised planning method for risky investments

Wilhelm Brandes, Hans-Joachim Budde and Eberhard Sperling

European Review of Agricultural Economics, 1980, vol. 7, issue 2, 147-175

Abstract: In general, investment decisions are more risky than decisions concerning annual production. Until now no method appears to have been available to assist farmers in evaluating investment risk. While pragmatic methods must be refuted for theoretical reasons, methods based on programming or optimising simulation are too costly. To bridge this gap, COMPRI(= COMputerised Planning of Risky Investments) has been developed. The method aims at evaluating a limited number of investments considered by the farmer. It is a combination of risk analysis and multiperiod farm development planning. COMPRI allows for the treatment of the consumption pattern of the entrepreneur as well as for his specific tax and financial situation. Important decision criteria are parameters of the distribution functions for the present value of the investments and for owner's equity at the end of the planning period. A standardised method, COMPRI can be applied to a variety of investment problems.

Date: 1980
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