 The Investment Process and Decision Making: the Financial PerspectiveColin White and Miao Fan Chapter 5 in Risk and Foreign Direct Investment, 2006, pp 63-83 from Palgrave Macmillan Abstract: Abstract This chapter emphasises the importance of avoiding two types of mistakes, making a poor investment and ignoring a good one. It continues with the articulation of the formula for estimating the net present value of a single project, initially in which there is no uncertainty. The next section explores the significant measurement problems for inputs into such a formula, including the problems following from its international nature. The assumptions of the analysis are made explicit. Later sections show how such a formula over-simplifies the appraisal of an investment project, by ignoring the key issue of uncertainty. The chapter goes on to analyse the impact of uncertainty on decisions making, assuming that all the relevant risk is epistemic risk, risk arising from a lack of the relevant information. This uncertainty relates both to the identification of the project and to the reading of the environment in which the project will operate and its influence on the project. The real options approach which allows for a reduction of uncertainty is discussed. Keywords: Foreign Direct Investment; Discount Rate; Real Option; Investment Project; Call Option (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-62483-2_5 Ordering information: This item can be ordered from Access Statistics for this chapter More chapters in Palgrave Macmillan Books from Palgrave Macmillan |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.