Project Net Present Value estimation under uncertainty

Helena Gaspars-Wieloch

Abstract

The paper contains a description of a possible modification of the original Net Present Value which allows one to evaluate projects under uncertainty with unknown probabilities (understood mainly as frequencies). Cash flows are usually uncertain since both incomes and expenditure related to the project concern the future. Additionally, probabilities of particular scenarios may be unknown due to many factors (e.g. the diversity of definitions for probability, lack of historical data, lack of sufficient knowledge about possible states of nature). The novel approach is based on a hybrid of Hurwicz and Bayes decision rules and is supported by a sensitivity analysis. The new method applies scenario planning and takes into account the decision maker’s attitude towards a given decision problem (measured by coefficients of pessimism and optimism). The procedure can be used even in the case of asymmetric distributions of net cash flows at particular periods since it considers the frequency of each value. The modification of the Net Present Value may support any uncertain multi-period economic decision.
Author Helena Gaspars-Wieloch (WIiGE / KBO)
Helena Gaspars-Wieloch,,
- Department of Operations Research
Journal seriesCentral European Journal of Operations Research, ISSN 1435-246X, e-ISSN 1613-9178, (N/A 40 pkt)
Issue year2019
Vol27
No1
Pages179-197
Publication size in sheets0.9
Keywords in Polishwartość NPV, natura decydenta, niepewność, nieznane prawdopodobieństwa (częstości), podejmowanie decyzji, analiza wrażliwości
Keywords in EnglishProject Net Present Value, Decision maker’s nature, Uncertainty, Unknown probabilities (frequencies), Decision making, Sensitivity analysis
ASJC Classification1803 Management Science and Operations Research
DOIDOI:10.1007/s10100-017-0500-0
URL https://link.springer.com/article/10.1007/s10100-017-0500-0
Languageen angielski
Score (nominal)40
Score sourcejournalList
ScoreMinisterial score = 40.0, 06-04-2020, ArticleFromJournal
Publication indicators WoS Citations = 3; Scopus SNIP (Source Normalised Impact per Paper): 2018 = 0.914; WoS Impact Factor: 2018 = 1.26 (2) - 2018=1.179 (5)
Citation count*14 (2020-06-15)
Additional fields
UwagiFirst Online 02 November 2017
Cite
Share Share

Get link to the record


* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
Back
Confirmation
Are you sure?