Valuation of an innovative investment project using real options approach: A case study of a viticulture company in Spain

Abstract

In Spain, the leader in pesticide sales in the European Union, a high-tech and innovative company provides services to the wine industry to optimise phytosanitary work, reduce crop losses and lower production costs. Although the nature of its business encourages the transition to a sustainable agri-food system, it also involves risks associated with uncertainty. The objective of this article was to perform the valuation of the company through the real options approach, including an expansion option, analysing whether this company will be able to increase the value of its project by expanding its activity to a larger number of vineyards. Results showed that the application of the real options approach projected a higher result than the traditional net present value method, so that if the company makes additional investments in its precision agriculture project, these will increase the value by a 15%.

Keywords

• company valuation
• efficient resource management
• innovation processes
• precision agriculture