Discounted cash flow valuation of conventional and cage-free production investments

This study compares profitability and risk of conventional cage-free egg production in the United States. Evaluating is particularly relevant given ongoing consumer driven changes new legislation. Results show that while Modified Internal Rate Return (MIRR) for above an estimated industry opportunity cost capital, production’s MIRR does not fully satisfy investors’ expectations. The investment, between 5.6% (deterministic model) 8.0% (stochastic) per 15-month flock, below 9.4% capital. In addition, simulations there a 90% probability falling 18.5 20.3% ranging from 6.8 to 9.4%. order be as equally profitable production, prices at farmer gate should 74% over prices. Such high are highly unlikely occur recent price premia willingness pay estimates research. provides framework producers can use evaluate potential effects their portfolio products (i.e. mix) they accommodate schedules this evolving industry.