Optimal investment in an automatic milking system: an application of real options
Abstract
Automatic milking systems (AMSs) are a relatively new technology characterized by uncertainty and irreversibility. The choice to invest in such a system is analyzed in a real options framework. Alternative financing arrangements, depreciation methods, and other factors are investigated to determine their influence on the optimal investment decision. The results suggest that farm capital structure, loan term, and depreciation method have little impact on the investment decision. The primary determinant in the AMS technology adoption decision appears to be whether the AMS will last longer than the existing parlor.
Keywords
Citation
Hyde, J., Stokes, J.R. and Engel, P.D. (2002), "Optimal investment in an automatic milking system: an application of real options", Agricultural Finance Review, Vol. 63 No. 1, pp. 75-92. https://doi.org/10.1108/00215010380001142
Publisher
:MCB UP Ltd
Copyright © 2002, MCB UP Limited