Economic viability for deploying hydroponic system in emerging countries: A differentiated risk adjustment proposal

摘要

This paper examines the economic viability of a hydroponic system using a distinguished approach to treat investment risk. Risks of the proposed investment project were considered in an investor's minimum attractiveness rate, in which theoretical models of mature financial markets were adjusted to specificities of emerging markets, such as Brazil. Production costs of a hydroponic farm in Mato Grosso do Sul (Brazil) were searched between July and October 2017. Economic viability of the project was evaluated using the following financial metrics: Net Present Value (NPV), Internal Rate of Return (IRR), Modified Internal Rate of Return (MIRR), Benefit-Cost Ratio (BCR), Cash Generating Index (CGI) and Discounted Payback Period (DPP). An annual interest rate of 9.1060% was used as a Minimum Acceptable Rate of Return (MARR). Sensitivity analysis based on a Monte Carlo simulation was adopted for risk analysis. Initial investment for deploying the project was estimated at $ 89,653.66, with gross annual revenue of $103,903.63. Results of economic viability analysis showed the following financial values: NPV ($ 177,845.74), IRR (30,45%), MIRR (16,81%), EAV ($ 24,856.30), BCR (2,13), CGI (2,29) and DPP (5,24 years). Sensibility analysis identified that NPV is mostly affected by variations in prices received by the farmer. Risk analysis based on Monte Carlo method confirmed economic viability for the investment project proposed in this study.