scholarly journals Evaluation of Decision-Making for the Optimal Value of Sustainable Enterprise Development under Global 100 Index Thinking

2019 ◽  
Vol 11 (4) ◽  
pp. 1106 ◽  
Author(s):  
Tyrone Lin ◽  
Shu-Yen Hsu ◽  
Chiao-Chen Chang
Keyword(s):  
Decision Making ◽  
Net Present Value ◽  
Evaluation Model ◽  
Social Costs ◽  
Optimal Timing ◽  
Environmental Costs ◽  
Present Value ◽  
The Real ◽  
Sustainable Operation ◽  
Study Results

This study seeks the best economic returns of a company’s sustainable business process, employs the Triple Bottom Line Model using the Global 100 Index as the decision variable, and follows the Geometric Brownian Motion, so as to determine the optimal timing for the input of environmental and social costs. The results of the sensitivity analysis show that when the average growth rate of the Global 100 Index is low, the optimal timing for the company’s input of environmental costs and social costs can be obtained. Analysis of the numerical example shows that, based on the financial value of the economic factor, companies should invest in environmental costs as soon as possible. This study replaces the conventional net present value model with the options evaluation model, uses the Global 100 Index as the threshold for decision-making evaluation to provide a more complete decision-making evaluation reference for enterprises, and makes up for the gap in recent research regarding investment time and decision variables. The study results introduce potential strategic value evaluations into the evaluation model of long-term uncertain sustainable operation value, which is more appropriate for the evaluation of the real sustainable operation value. It also provides implementation strategies for decision-makers to mitigate risks under uncertain environments and is the major difference and value of the Real Options Approach (ROA) to supplement Net Present Value (NPV) principles. The results of this study provide a reference for the sustainable development decision-making of corporate sustainability and feasibility and offer an important link in the value chain of food industry operations and management.

APPLYING REAL OPTIONS AND THE MAXIMUM NPV RULE TO MARKET ENTRY/EXIT STRATEGIES

2005 ◽  
Vol 22 (01) ◽  
pp. 71-83 ◽  
Author(s):  
TYRONE T. LIN ◽  
TUNG-LI SHIH
Keyword(s):  
Decision Making ◽  
Growth Factors ◽  
Real Options ◽  
Market Entry ◽  
Net Present Value ◽  
Cash Flows ◽  
Present Value ◽  
The Real ◽  
Real Options Approach ◽  
Complex Calculation

This study applies the real options approach to examine the maximum net present value of the market entry/exit thresholds given uncertain cash flows. The discount and growth factors are determined in the proposed entry/exit models, facilitating the complex calculation of the discount and growth rates to determine the present value of cash flow streams. Accordingly, this work successfully combines the maximum net present value method and the real options approach for decision-making by simply considering the discount and growth factors.

scholarly journals Decision-making tools: stochastic simulation model accounting for the impacts of biological variation on success of bovine embryo transfer programs1

2018 ◽  
Vol 2 (4) ◽  
pp. 451-462
Author(s):  
Dustin G Aherin ◽  
Jennifer M Bormann ◽  
Jessica L Heier Stamm ◽  
Michael D MacNeil ◽  
Robert L Weaber
Keyword(s):  
Decision Making ◽  
Stochastic Simulation ◽  
Embryo Transfer ◽  
Net Present Value ◽  
Commercial Application ◽  
Extensive Literature ◽  
Analysis Tool ◽  
Bovine Embryo ◽  
Present Value ◽  
Embryo Production

Abstract The objective of the project was to create an economic risk analysis tool for user-defined embryo transfer (ET) programs as an aid in decision-making. Distributions defining the biological uncertainty for many reproductive outcomes are estimated through extensive literature review and limited industry sources. Applying the Latin hypercube variation of Monte Carlo simulation, a sample value from the descriptive distribution associated with each stochastic variable is included in each iteration of the simulation. Through large numbers of iterations with dynamic combinations of variable values, the process culminates in a distribution of possible values for the net present value, annuity equivalent net present value, and return on investment associated with the modeled embryo production scenario. Two options for embryo production, multiple ovulation embryo transfer (MOET) and in vitro embryo production (IVP) from aspirated oocytes, are modeled. Within both MOET and IVP, the use of unsorted or sex-sorted semen is considered, as well as the exception or inclusion of follicular synchronization and/or stimulation before ovum pick-up in IVP procedures. Pretransfer embryo selection through embryo biopsy can also be accounted for when considering in vivo derived embryos. Ample opportunity exists for the commercial application of in-depth, alternative ET scenario assessment afforded through stochastic simulation methodology that the ET industry has not yet fully exploited.

OP97 Digital Home Services: Overcoming Critical Barriers In Early Decision Making

2018 ◽  
Vol 34 (S1) ◽  
pp. 36-36
Author(s):  
Linn Nathalie Stome ◽  
Arne Norrud ◽  
Martin Fjordholm ◽  
Kari Kvaerner
Keyword(s):  
Decision Making ◽  
Net Present Value ◽  
Early Stage ◽  
Service Needs ◽  
Developmental Phase ◽  
Present Value ◽  
Early Assessment ◽  
Digital Home ◽  
Health Innovations ◽  
Home Based

Introduction:There is a lack of adoption and diffusion of health innovations needed to drive the implementation of important breakthroughs in value-based health care. To stimulate organizational changes, decision-makers need to see potential benefit at an early stage. The aim of the present study was to assess the potential effects of a conceptualized intention to provide digital home-based care and compare it to the current provision of such care. The new intervention aims to strengthen the municipality's care services by offering a digital communication platform to recipients of home-based health services and their dependents. The platform is designed to be implemented nationally and is in line with home service needs identified in several white papers.Methods:An interdisciplinary team united to determine and quantify potential effects of the project. Effects of the digitalized service were distinguished in priced quantitative, unpriced quantitative and qualitative effects. A ten-year present value calculation with a calculation rate of four percent was used for the estimates. A risk analysis was also carried out.Results:The present value calculation resulted in estimated savings equal to EUR 25.8 million , with present value investments costs of EUR 5.5 million over ten years. This resulted in net present value per invested euro in the public sector equal to EUR 3.2. Overall assessment of uncertainty related to the intervention's socio-economic profitability was deemed average. Based on data quantified estimates from the conceptual phase, the project succeeded in the decision-making and funding needed to proceed into the next developmental phase of the project.Conclusions:The present approach to early assessment may provide much desired decision support in an early innovation phase when data are still missing. Our experience is that early stakeholder involvement and the early assessment and quantification of value gains are of utmost importance to overcome the critical barriers to organization health innovations.

Maintenance Decisions for Offshore Structures Using Real Options Theory

2004 ◽  
Author(s):  
Ernesto Heredia-Zavoni ◽  
Sandra Santa-Cruz
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Cash Flow ◽  
Net Present Value ◽  
Offshore Structures ◽  
Present Value ◽  
Real Options Theory ◽  
Financial Variables ◽  
Maintenance Decisions ◽  
Options Theory

Real Options methods are currently used to assess investment projects considering: (1) the decision options that one can have along the development of the project, such as to expand it, or reduce it, or to abandon it, or to differ it, and (2) the uncertainty in some financial variables for the assessment of the economic investment. In these two regards, Real Options methods are superior to the traditional Net Present Value method. The purpose of the present paper is to establish the basis for Real Options modeling for decision making on design, inspection, maintenance, and decommissioning of offshore structures. The use of Real Options theory is sought in order to account for: (1) uncertainties in the financial variables involved in risk assessment based on expected costs, such as the economic consequences due to failure of a system; and (2) uncertainties associated with the resistance and loading of the structure for reliability assessment. An application of Real Options Theory is given in the paper for decision making on maintenance for an offshore structure. Cash flow from oil revenue is modeled as a stochastic process. Preventive and corrective maintenance is analyzed as a critical situation where the decision maker has the option to pay the costs of maintenance in order to obtain a benefit. Expressions are derived for the estimation of the value of the maintenance option; they are based on the derivation of the Black-Scholes equation for the evaluation of financial options. It is shown that the value of such project is equal to the sum of the net cash flow of the project (as with a Net Present Value evaluation) plus the value of the maintenance option. Projects with one and two decision times along the life of the structure are formulated and analyzed. Closed form solutions are obtained for such cases. An example is given in order to illustrate the differences between maintenance decisions using the Net Present Value and the Real Options method.

Business opportunity assessment in Slovene organic spelt processing: application of real options model

2011 ◽  
Vol 26 (3) ◽  
pp. 179-184 ◽  
Author(s):  
Karmen Pažek ◽  
Črtomir Rozman
Keyword(s):  
Decision Making ◽  
Real Options ◽  
Net Present Value ◽  
Sunk Costs ◽  
Organic Farms ◽  
Processing Application ◽  
The Real ◽  
Business Opportunity ◽  
Real Options Approach ◽  
Flour Production

AbstractDecision making in organic farming is related to risk and uncertainty, and options must be evaluated in the decision-making process. This paper presents the methodology of an integrated deterministic simulation system (KARSIM 1.0) application for decision-making support on organic farms in northeastern Slovenia. An emphasis to modify the net present value (NPVt) criterion by incorporating the real options approach was made. Its application is shown in organic spelt (Triticum aestivum ssp. spelta McKey) production and processing using two real options approaches, the Black–Scholes and binomial models. The NPVt indicates that the decision to process spelt for animal fodder is financially unfeasible, while the real options approach differentiates the results by organic spelt grain and flour production for human nutrition. It may be concluded that the real options approach can be useful when assessing projects with uncertainty, sunk costs and irreversibility, and it can provide for examining agricultural investment decisions.

scholarly journals A Real Options Approach to Valuate Solar Energy Investment with Public Authority Incentives: The Italian Case

Energies ◽  
2020 ◽  
Vol 13 (16) ◽  
pp. 4181
Author(s):  
Antonio Di Bari
Keyword(s):  
Solar Energy ◽  
Real Options ◽  
Real Option ◽  
Net Present Value ◽  
Option Value ◽  
Present Value ◽  
Energy Investment ◽  
The Real ◽  
Real Options Approach ◽  
Real Option Value

Solar energy investment represents currently a valid reason to support sustainable economic development. In fact, over the last few years, governments have applied different measures to incentivize private consumers and firms to use renewable energies. Photovoltaic (PV) projects are characterized by uncertainty due to meteorological conditions, the unpredictable behavior of government, and managerial flexibility. Since the Net Present Value (NPV) approach is not able to capture these uncertain factors, it was replaced with the Real Options Approach (ROA). The latter method manages to embed flexibility in PV investment using binomial trees. This paper valuates PV investment in all regional areas in Italy using an integrated approach between the discounted cash flows method and real option value, called Expanded Net Present Value (ENPV). We fit the probability of tax benefits into a binomial lattice model after analyzing the geographical position and weather conditions of all regional capitals of Italy. The results show that the cities with high irradiance/temperature have positive NPV and high investment values. On the other hand, while most cities have negative NPV, the inclusion of the flexibility in investment decisions gives additional value to the project, making the ENPV positive and implying an attractive investment opportunity with the possibility of delaying the project. We also propose a sensitivity analysis that shows how the real option value changes when incentive policies of the government become more attractive. This paper contributes to the existing literature in the way of considering financial, meteorological/geographical, and political factors to valuate PV investment.

scholarly journals Forest management decision-making using goal programming and fuzzy analytic hierarchy process approaches (case study: Hyrcanian forests of Iran)

2019 ◽  
Vol 65 (No. 9) ◽  
pp. 368-379
Author(s):  
Seyedeh Soma Etemad ◽  
Soleiman Mohammadi Limaei ◽  
Leif Olsson ◽  
Rasoul Yousefpour
Keyword(s):  
Decision Making ◽  
Environmental Economic ◽  
Forest Management ◽  
Analytic Hierarchy Process ◽  
Goal Programming ◽  
Net Present Value ◽  
Present Value ◽  
Analytic Hierarchy ◽  
Stock Level ◽  
Hierarchy Process

The aim of this study is to determine the optimum stock level in the forest. In this research, a goal programming method was used to estimate the optimal stock level of different tree species considering environmental, economic and social issues. We consider multiple objectives in the process of decision-making to maximize carbon sequestration, net present value and labour. We used regression analysis to make a forest growth model and allometric functions for the quantification of carbon budget. Expected mean price is estimated using wood price and variable harvesting costs to determine the net present value of forest harvesting. The fuzzy analytic hierarchy process is applied to determine the weights of goals using questionnaires filled in by experts in order to generate the optimal stock level. According to the results of integrated goal programming approach and fuzzy analytic hierarchy processes, optimal volume for each species was calculated. The findings indicate that environmental, economic and social outcomes can be achieved in a multi-objective forestry program for the future forest management plans.

scholarly journals Valuing a natural gas pipeline expansion project: A copula-TGARCH application in Mexico

2018 ◽  
Vol 64 (2) ◽  
pp. 95
Author(s):  
Ricardo Massa Roldan ◽  
Montserrat Reyna Miranda
Keyword(s):  
Natural Gas ◽  
Real Options ◽  
Net Present Value ◽  
Joint Effect ◽  
Gas Pipeline ◽  
Energy Prices ◽  
Present Value ◽  
The Real ◽  
Investment Projects ◽  
The Individual

<p>With the liberalization of energy prices and the opening of the energy sector to competitors in Mexico, an opportunity for new investment projects is now open. Due to the current conditions of international energy markets, such as volatility and low prices with no prospect of reversion, a need for valuation tools to better capture the risk and benefits of a project presents itself. We propose a methodology based on the volatility treatment of numerous underlying assets in a Real Options Analysis: using a TGARCH for the individual volatilities and copulas for the joint effect. The methodology is applied to a natural gas distribution project of Mexico’s State oil company Petróleos Mexicanos (PEMEX). An estimated net present value of the gas pipeline is provided, considering the real options perspective. The result of our empirical application validates the real option’s theory of a higher net present value estimation for the project when incorporating the effect of different sources of uncertainty and non-linear interdependence.</p>

scholarly journals Assessing the impact of environmental cost on the capital investment decision-making of the Electricity Supply Commission, South Africa

2020 ◽  
Author(s):  
◽  
Toyese Titus Oyewo
Keyword(s):  
Decision Making ◽  
Capital Investment ◽  
Power Plants ◽  
Social Cost ◽  
Net Present Value ◽  
Environmental Cost ◽  
Electricity Supply ◽  
Present Value ◽  
Coal Power Plants ◽  
Coal Power

The availability of energy (electricity) is a key factor in economic growth and the sustainability of production processes. The need to quantitatively measure the environmental risk and hazard associated with energy sources for the environment is useful in evaluating capital investment for decision-making. Coal (fossil fuel) is the main source of energy in South Africa, based on its availability and cost-effectiveness. Specifically, quantitative research using mathematical marginal social cost modelling to evaluate the environmental cost of emissions emanating from the Electricity Supply Commission’s (ESKOM) coal power stations is employed. It was discovered that the price of electricity has trebled over the lifespan of coal power plants. Therefore, the need to construct coal power plants with optimum levels of production was highlighted. The net present value (NPV) technique was used to evaluate ESKOM's capital investment and the marginal social cost mathematical model was developed for measuring and quantifying the emission costs associated with the lifespan of the coal power plants. Results revealed that the optimum level production of 2,150,000 Gigawatts per annum within the range of the present capacity of ESKOM of 2,292,000 gigawatts annually is required and profitable to ESKOM. The net present value yielded a positive value of R1, 448,713,000,000-00 over a period of 30 years of coal power plants’ life-span. However, various technologies used to minimize emissions were also considered and investigated to confirm the feasibility and profitability of investment in coal- powered stations using environmental management accounting and marginal social cost approaches.

Introducing Investment Options

2021 ◽  
pp. 131-135
Author(s):  
Camilla Toulmin
Keyword(s):  
Decision Making ◽  
Opportunity Cost ◽  
Net Present Value ◽  
Cost Of Capital ◽  
Payback Period ◽  
Rate Of Return ◽  
Internal Rate Of Return ◽  
Risk And Uncertainty ◽  
Present Value ◽  
Over Time

This chapter offers a brief survey of how the investment literature deals with risk and uncertainty, and examines the reasons for variation in returns between farmers from the principal assets – wells, oxen plough-teams, breeding cattle. Simple decision-making models derive criteria for choosing between investment options according to the net present value, internal rate of return, and payback period associated with a given pattern of returns over time. Portfolio models presents the rationale for investment in a range of assets, the returns from which are poorly correlated. Farmers differ in terms of their access to factors of production, the scale of their activities, the opportunity cost of capital, and vulnerability to risk. Four idealised household types – A, B, C, D – are described in order to compare the flow of returns from the three principal investments – wells, oxen plough-teams, and breeding cattle.

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