Addressing Risk Associated to ICT-Based Technology: Estimation of Financial Parameters

The aim of this work is to discuss the ways risk may affect farm investments in ICT-based technology such as precision agriculture (PA) technologies and to establish how to better incorporate risk and uncertainty into cost-benefit analyses, in order to calibrate the estimated expected net present value from farmers' investments. To properly measure the factors underlying risk in agriculture it is essential to collect a proper piece of data and information from technology, market and institutions. However, it is somehow hard to rely on historical information about PA technologies as they have appeared on the market in a recent time. Thus, in this work an ad hoc methodology useful to aid risk-averse farmers is developed, dealing with the estimation of financial parameters like discount rates, economic life of technology, and residual values at the end of the period for which benefits are considered.