Opções Reais em Investimentos Florestais

While forest managers have a wide variety of decision making tools available for harvest scheduling purposes, ultimate investment decisions typically rely on the use of Discounted Cash Flow valuations. This paper assesses the use of real options analysis in maximizing value from eucalyptus forest harvesting under uncertain wood price conditions, using as a base case a seven year rotation. The analysis compares traditional discounted cash flow valuation with the real options approach, using the binomial model developed by Cox, Ross, and Rubinstein (1979), and assuming two different stochastic processes for price trend: Geometric Brownian Motion and Mean Reversion, as proposed by Nelson and Ramaswamy (1990). The analysis suggests higher values from the real options approach compared to those from traditional discounted cash flow valuation. The mean reversion process was found more suitable for forest investment valuation, resulting in values reasonable to the use of land for forest production, while the use of Geometric Brownian Motion resulted in unrealistic valuations. The use of real options in the assessment of forest assets can provide investment decision makers an alternative tool for recognizing value in the rural land market.