Project Net Present Value estimation under uncertainty
Helena Gaspars-Wieloch ()
Additional contact information
Helena Gaspars-Wieloch: Poznań University of Economics and Business
Central European Journal of Operations Research, 2019, vol. 27, issue 1, 179-197
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.
Keywords: Project Net Present Value; Decision maker’s nature; Uncertainty; Unknown probabilities (frequencies); Decision making; Sensitivity analysis (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s10100-017-0500-0 Abstract (text/html)
Access to the full text of the articles in this series is restricted.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:cejnor:v:27:y:2019:i:1:d:10.1007_s10100-017-0500-0
Ordering information: This journal article can be ordered from
http://www.springer. ... search/journal/10100
Access Statistics for this article
Central European Journal of Operations Research is currently edited by Ulrike Leopold-Wildburger
More articles in Central European Journal of Operations Research from Springer, Slovak Society for Operations Research, Hungarian Operational Research Society, Czech Society for Operations Research, Österr. Gesellschaft für Operations Research (ÖGOR), Slovenian Society Informatika - Section for Operational Research, Croatian Operational Research Society
Bibliographic data for series maintained by Sonal Shukla ().