Skip to:ContentBottom
Cover image for A real-options analysis of wine grape farming in north west Victoria [electronic resource] / Emayenesh Seyoum and Chris Chan.
A real-options analysis of wine grape farming in north west Victoria [electronic resource] / Emayenesh Seyoum and Chris Chan.
Title:
A real-options analysis of wine grape farming in north west Victoria [electronic resource] / Emayenesh Seyoum and Chris Chan.

Research paper 2012.4
Author:
Seyoum, Emayenesh.

Chan, Chris.

Victoria. Department of Primary Industries. Policy and Strategy Group.
ISBN:
9781743261224
Personal Author:
Publication Information:
Melbourne : Policy and Strategy Group, Dept. of Primary Industries, 2012.
Physical Description:
19 pages ; 30 cm.
Series:
Research paper / Dept. of Primary Industries, Policy and Strategy Group ; 2012.4

Research paper (Victoria. Department of Primary Industries. Policy and Strategy Group) ; 2012.4.
General Note:
Paper presented at the 2012 annual conference of the Australian Agricultural and Resource Economics Society February 7–10, Fremantle, Western Australia.
Abstract:
This paper reports a use of a real-options valuation methodology to analyse wine grape farm investment under price and yield uncertainty. Revenue levels to incentivise entry and exit were calculated for three different sizes of wine grape farms in north west Victoria. The modelling identified lower exit and higher entry triggers than indicated by conventional net present value calculation. The wide gap of estimated indeterminacy in farm investment highlights the intertwined influence of numerous economic factors - cost structure, economies of scale, market volatility, transaction costs, and sunk and salvaged asset valuation. Drawing on these determinants of farm investment and disinvestment, the paper discusses the role of investment incentives in affecting industry transformation and the scope for policy intervention to assist structural adjustment of the wine grape sector.
Added Author:
Electronic Access: