TECHNIQUES FOR MANAGING PROJECTS RISK IN CAPITAL BUDGETING PROCESS

Goran Karanovic, Suzana Baresa and Sinisa Bogdan
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Goran Karanovic: Faculty of Tourism and Hospitality Management in Opatija, University of Rijeka, Croatia

UTMS Journal of Economics, 2010, vol. 1, issue 2, 55-66

Abstract: The paper examines capital budgeting process and techniques of risk analysis in the process of selecting optimal project. Corporate manager in process of capital budgeting uses numerous techniques some of them are based on intuition and experience of manager, and some of them are analytic based on sensitive, scenario, decision tree and Monte Carlo method. All methods are used to determinate and to predict risk influence on the projects. Article deals with analytical techniques and real problems that can arise in capital budgeting process. Trough case study in article we analyzed risks that may emerge from different techniques. Conclusion that emerges from analyzing different methods of risk techniques is that only with right combination of these techniques corporate manager could decide correctly to choose optimal capital project.

Keywords: Mnte Carlo; sensitive method; scenario method; decision tree; NPV; discount rate. (search for similar items in EconPapers)
JEL-codes: D81 G31 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ris:utmsje:0015

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