Karmen PA�EK and Črtomir ROZMAN
pp. 13-17

The latest developments in investment analysis offer a number of valuable insights into possible ways of evaluating investment opportunities, encountering the weaknesses of net present value criterion. More specifically, irreversibility, uncertainty and the choice of timing are conditions that Net Present Value does not include but they alter the investment decision in a determinant way. By employing contingent claims analysis in tangible investments better assessment results can be derived. In this paper, an emphasis is made to modify the Net Present criterion by incorporating the real options approach. Its application is demonstrated in an organic spelt production and processing. The Net Present Value indicates that the decision of a spelt processing for animal fodder is unfeasible (NPVt = - 1.144,84 �) while the real options approach differentiates the results by organic spelt grain production for human nutrition (strategic real option of spelt grain, NPVSRO = 127.96 �). The conclusion is that the real options approach can be proved useful when assessing projects with uncertainty and irreversibility and it can provide a new way of examining agricultural investment decisions.

Key words: real options, Net Present Value Analysis, Black-Scholes model, organic spelt processing