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dc.contributor.authorSchmit, Todd M.
dc.contributor.authorLuo, Jianchuan
dc.contributor.authorTauer, Loren W.
dc.date.accessioned2018-08-21T17:09:14Z
dc.date.available2018-08-21T17:09:14Z
dc.date.issued2008-07-01
dc.identifier.urihttps://hdl.handle.net/1813/57718
dc.descriptionWP 2008-14 July 2008
dc.descriptionJEL Classification Codes: D21; D81; Q4
dc.description.abstractA 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.
dc.language.isoen_US
dc.publisherCharles H. Dyson School of Applied Economics and Management, Cornell University
dc.titleEthanol Plant Investment using Net Present Value and Real Options Analyses
dc.typearticle
dcterms.licensehttp://hdl.handle.net/1813/57595


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  • Dyson School Working Papers
    Working Papers published by the Charles H. Dyson School of Applied Economics and Management, Cornell University

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