Forest plantations with Toona ciliata: impacts of managerial flexibility on economic viability

Forest plantations with Toona ciliata are presented as economically viable thanks to the suitability of their wood for high-quality niche products. However, this study verifies whether investment projects in T. incorporation managerial flexibility. We apply technical-economic coefficients from forest over a 15-year planning horizon, considering project an underlying asset and price only source uncertainty. Using Monte Carlo method, we model uncertainty obtain volatility, so that, using Real Option Approach, flexibility deferral, expansion abandonment is added assets. Based on traditional economic valuation methodology, obtained static net present value USD 5,075, which reflects viability plantations. Due arising timber prices, volatility was 131.7%. Afterwards, it found that incorporating deferral options premium 2,147 project, redirecting towards expanded 7,223. Incorporation real provides support decision-making process management plantations, resulting 42.3% increase project.