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A computerised planning method for risky investments

Author

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  • WILHELM BRANDES
  • HANS-JOACHIM BUDDE
  • EBERHARD SPERLING

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.

Suggested Citation

  • Wilhelm Brandes & Hans-Joachim Budde & Eberhard Sperling, 1980. "A computerised planning method for risky investments," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 7(2), pages 147-175.
    • Handle: RePEc:oup:erevae:v:7:y:1980:i:2:p:147-175.
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    File URL: http://hdl.handle.net/10.1093/erae/7.2.147
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    Cited by:

    1. Kostrova, Alisa & Britz, Wolfgang & Djanibekov, Utkur & Finger, Robert, 2016. "Monte-Carlo Simulation and Stochastic Programming in Real Options Valuation: the Case of Perennial Energy Crop Cultivation," Discussion Papers 250253, University of Bonn, Institute for Food and Resource Economics.
    2. Uwe Kehrel & Walter Schmitting, 2008. "Jenseits der Grenzen der klassischen Investitionsrechnung: Integration von Vollständigen Finanzplänen, flexibler Planung und Simulation," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 19(1), pages 59-83, May.
    3. Palatnik, Ruslana Rachel & Freer, Mikhail & Levin, Mark & Golberg, Alexander & Zilberman, David, 2023. "Algae-Based Two-Stage Supply Chain with Co-Products," Ecological Economics, Elsevier, vol. 207(C).

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