Analysis of real options applied in the diversification of rural production in Paraná state

Abstract

The objective of this paper is to analyze the contribution of the use of the Real Options Theory (TOR) in the investments analysis of the diversification of rural production in Paraná state (Brazil). It is an exploratory research, with a technical documental procedure, of quantitative character, using primary and secondary sources, in cross-section and statistical analysis of a case study on the analysis of the financial viability and the distribution of probabilities by TOR in an investment project of diversification in agricultural production. The cash flow was based on data from suppliers and information collected on the Secretariat of Agriculture of Paraná State (Seab) website, in relation to coffee, cassava, corn, soybean and wheat crops. The analysis consisted in calculating the present value using traditional investment analysis methods such as NPV, TIR and Payback, and the real options through the binomial tree for comparability. The results show that the Real Options Theory is a more accurate method to calculate the present value in projects of diversification of rural production, since it better captures managerial flexibility and the handling of NPV considering project volatility.

Key-words:
investment analysis; theory of real options; agriculture