Sensitivity Analysis of the Construction of Olive Production Project in Dara’a Governorate

Abstract

This research aimed to carry out sensitivity analysis of one-hectare project producing olive in Dara’a governorate to determine financial effects of uncertainty situation. There for, a model simulating the real investment in olive in the governorate was designed. The results showed that the project under normal conditions recovers its investment cost after 12.6 years, while the Net Present Value (NPV) was 3087004 Syrian Pounds and the Internal Rate of Return (IRR) accounted of 17%.

On the other hand, the Payback Period (PBP) was negatively affected by 10% increase in costs along with 10% decrease in returns greater than 10% increase in costs, 5% decrease in production, or 5% decrease in output prices. The project also had -1217346 Syrian Pounds loss with 10% increase in costs along with 10% decrease in returns, while the NPS was positive with the other studied changes previously mentioned. Compared to the normal situation, the IRR decreased between 1% and 2% with all studied changes with the exception of 10% increase in costs and 10% decrease in returns, where the rate became less than the interest rate (9.5%), and the project was not able to get loans. Therefore, the research provided practical and scientific recommendations improving the olive sector in Dara’a governorate