<abstract xmlns="http://www.w3.org/1999/xhtml">

To survive in today's competitive environment, companies must continuously develop and offer customers new products. To increase the probability of a successful business case of investing in the development of a new product, careful attention must be paid to risk analysis in terms of the present value of future potential income. The article considers an example of the research work of the Latvia University of Life Sciences and Technologies, in the framework of which a technical and technological project was developed to produce a new product, like Mediterranean anchovy, from cheaper Baltic sprats. <italic>The main goal of this work</italic> is to explore the application multi-factor sensitivity and fuzzy real option analysis to the valuation of new product development project.
The multivariate analysis of the sensitivity of the financial model of the greenfield production project described in this article revealed the main risk groups, as well as their degree of influence on the assessment of the Net Present Value of the project by a potential investor. The use of Fuzzy Real Option Valuation made it possible to evaluate the project with uncertain parameters, as well as to calculate the potential upside from preliminary refinement of parameters to eliminate negative scenarios.
The described approach is applicable to risk assessment of new food product development and allows investors to make a more informed decision about participation in such projects.
</abstract>

To survive in today's competitive environment, companies must continuously develop and offer customers new products. To increase the probability of a successful business case of investing in the development of a new product, careful attention must be paid to risk analysis in terms of the present value of future potential income. The article considers an example of the research work of the Latvia University of Life Sciences and Technologies, in the framework of which a technical and technological project was developed to produce a new product, like Mediterranean anchovy, from cheaper Baltic sprats. The main goal of this work is to explore the application multi-factor sensitivity and fuzzy real option analysis to the valuation of new product development project.
The multivariate analysis of the sensitivity of the financial model of the greenfield production project described in this article revealed the main risk groups, as well as their degree of influence on the assessment of the Net Present Value of the project by a potential investor. The use of Fuzzy Real Option Valuation made it possible to evaluate the project with uncertain parameters, as well as to calculate the potential upside from preliminary refinement of parameters to eliminate negative scenarios.
The described approach is applicable to risk assessment of new food product development and allows investors to make a more informed decision about participation in such projects.

Project Valuation and Risk Assessment in Food Product Development: Evidence from Fuzzy Real Option Valuation

Latvia University of Life Sciences and Technologies

Rural Sustainability Research

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

To survive in today's competitive environment, companies must continuously develop and offer customers new products. To increase the probability of a...

Project Valuation and Risk Assessment in Food Product Development: Evidence from Fuzzy Real Option Valuation

Publié en ligne: 11 août 2021

Pages: 38 - 52

Reçu: 02 févr. 2021

Accepté: 07 avr. 2021

DOI: https://doi.org/10.2478/plua-2021-0006

Mots clés
new products, project valuation, sensitivity and real option analysis, uncertainty, fuzzy numbers

© 2021 Irina Pilvere et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Project Valuation and Risk Assessment in Food Product Development: Evidence from Fuzzy Real Option Valuation

Publié en ligne: 11 août 2021

Pages: 38 - 52

Reçu: 02 févr. 2021

Accepté: 07 avr. 2021

DOI: https://doi.org/10.2478/plua-2021-0006

Mots clésnew products, project valuation, sensitivity and real option analysis, uncertainty, fuzzy numbers

© 2021 Irina Pilvere et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Mots clés
new products, project valuation, sensitivity and real option analysis, uncertainty, fuzzy numbers