Capital Budgeting under Climate Risk: A Case Study of the Investment decision on Irrigation Systems in the Portuguese Cork Sector

This thesis develops a comprehensive financial valuation framework for climate adaptation investments in the Portuguese cork sector, addressing the gap in the literature regarding irrigation investments specific to cork oak forests. Employing a case study with qualitative methodology of semi-structured interviews with sector stakeholders, the study evaluates two mutually exclusive production scenarios, an infrared irrigation system, and a drip irrigation system, against a baseline rainfed scenario. The drip irrigation system has a NPV of -168,195, a PI of 0.73, and an IRR of 9.56%; the infrared irrigation system has a NPV of 390,790€, a PI of 2.41, and IRR of 12.41%. The sensitivity and breakeven analysis confirm that the use of the infrared irrigation system is the best mode of production for the Portuguese cork sector.