Assessment of Risks in the Investment Project of Cattle Production

The paper is focused on a creation and evaluation of the investment project of cattle production with a risk taken into consideration via a simulation model. The investment plan of a business operating in the field of plant and animal production is oriented to the construction of large facilities with a capacity for 3000 pieces of cattle as well as the purchase of a suitable mechanization. The fundament of this work was a creation of a multi period balance model and formation of different variants of the individual projects which differ in production volume and mean of financing. The main evaluation criterion of the deterministic calculations was a net present value which takes into consideration the time factor and belongs among the dynamic methods. By means of sensitivity and simulation analysis is possible to identify an appropriate investment strategy under the risk conditions. The risk factors, which were identified by sensitivity analysis, are defined as random variables with certain probability distribution. Critical values of target criterion give information value which we can expect with willingness to tolerate given risk quantification. The comparison of distribution functions of investment alternatives allows the identification of the optimal strategy. On the basis of the gained results we came to the conclusion that the chosen variant of cattle production facility is a profitable investment which can increase the value of the company itself.