Valuation of Real Options for Beef Cattle Investment in Türkiye

Abstract

Objective: Up to now, beef cattle investment decisions in Türkiye have been made through traditional methods that underestimate the value of the investment by ignoring real options, resulting in the rejection of acceptable investments. This research is aimed to determine and appraise the real options in beef cattle investments and to explore the sufficiency of the value of real options for economically feasible investment, to fulfill the lack of information about real options related to beef cattle investments. Material and Methods: Research data were collected from 385 beef cattle farms in 14 provinces of Türkiye through questionnaire and observations. Data gathered from TSI, FAO, producer associations and other organizations were also used in the study. Appraisal of the real options were performed by using Binomial and Monte-Carlo Simulation methods. Results: Research results showed that the option values of delay, expansion and input-output changes of cattle fattening investment with the capacity of 150 head and NPV -1.79 million ₺ in Türkiye were 0.91 million ₺, 0.39 million ₺ and 0.22 million ₺, respectively. Conclusion: Calculated values of traditional and expanded NPV values of the investment indicates that beef cattle investments in Türkiye should be supported by the government. © 2023 Ege Universitesi. All rights reserved.