English, Article, Journal or magazine article edition: Ethanol Plant Investment using Net Present Value and Real Options Analyses Schmit, Todd M.; Luo, Jianchuan; Tauer, Loren W.

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Bookmark: http://trove.nla.gov.au/version/148342
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Ethanol Plant Investment using Net Present Value and Real Options Analyses
Author
  • Schmit, Todd M.
  • Luo, Jianchuan
  • Tauer, Loren W.
Physical Description
  • preprint
Notes
  • A real option analysis of dry-grind corn ethanol plants compared to a standard net present value analysis (NPV) shows that the option values increase entry prices and lower exit prices of investment and disinvestment considerably. For a large plant, the gross margin of ethanol price over the corn price for a gallon of ethanol using NPV shows that entry will occur with a $0.45 margin and shutdown will occur at a $0.38. Under a real options framework, the margins for entry and exit become $1.33 and $0.13, respectively. Under baseline conditions, a large operating plant would become mothballed at $0.18 and reactivate if margins rebounded to $0.66. Growth in the variability of ethanol margins will delay new plant investments, as well as exits of currently operating facilities.
  • Ethanol, Net Present Value, Real Options Analyses, Environmental Economics and Policy, Financial Economics, Production Economics, Resource /​Energy Economics and Policy, D21, D81, Q4,
  • RePEc:ags:cudawp:51145
Language
  • English
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