Abstract
Goal: In this paper, a binomial model is proposed to evaluate the option of deferring an investment and expanding the operational scale of a forest-based company that will perform the de-duplication of Pinus sp. and will market packaging for storage and transportation of vegetables.
 Design/Methodology/Approach: The proposed model measured the options of deferring an investment and expanding the operational scale of the forest-based company. In this perspective, the model of evaluation used was the binomial model in discrete time using the Real Options.
 Results: It was observed that the inclusion of management flexibilities in the decision making process has added value to the investment project; therefore, the project of investments in real assets proved to be economically feasible.
 Limitations of the investigation: The studies that address the corporate finance framework based on real data are a restrictive factor, due to the lack of collaboration of companies, that is, the availability of information that is usually classified.
 Practical implications: The study was based on the real data of a company; therefore, it can be adopted as a stimulus to the Real Options approach to the decision making of entrepreneurs or researchers.
 Originality/value: The focus of the study was to contemplate the managerial flexibilities of an industry of the secondary sector of the Brazilian economy, which performs the unfolding of wood, demonstrating the innovation of the technique approach used in this market segment.
Highlights
Successful economic and market development requires the application of traditional methods in business and the application of new modern methods adapted to the contemporary market needs, requirements and conditions
Capital expenditures (CAPEX) were accounted in the initial investment year in the amount of US dollars (USD) 862,079.93, and, when weighting operational expenditure (OPEX), depreciation and the taxes calculated by the traditional investment analysis method, allowed determining that the present investment project value was USD 1,756,218.11
When applying the simulation by the Monte Carlo method, it was found that this resulted in the average value of USD 1,757,801.67 and a standard deviation of USD 782,512.53, confirming the presence of volatility (Figure 1)
Summary
Successful economic and market development requires the application of traditional methods in business and the application of new modern methods adapted to the contemporary market needs, requirements and conditions. The application of this methodology consists of evaluating the suitability, efficiency and feasibility of the project, in order to make a final conclusion on whether a proposed investment project is profitable. The most widely used methodology is the discounted cash flow (DCF) analysis, which discounts the balances between costs and revenues within the estimated duration of the investment. The cash flow can recognize whether the investment project has successfully sustained over this time interval or not, showing the profits and loss during the project life (Batra and Verma, 2017; Iyer and Kumar, 2016; Sdino et al, 2016; Oliveira and Zotes, 2018)
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