A SIMULATION BASED APPROACH FOR AN INVESTMENT PROJECT EVALUATION UNDER UNCERTAIN AND RISKY ENVIRONMENTS
Abstract
Under high uncertainty and risky environments, the future estimations related to project proposals
cannot be certain and really materialized values. It is inevitable that there exists a deviation or gap between
forecasted values and actual values. Thus, project risk level of the proposal should be analyzed
in the assessment phase. Simulation based project evaluation approaches enables to make more reliable
investment decision since they permits including future uncertainty and risk in analyze process. In
addition, many times, project proposals are evaluated with more than one conflicted criteria. The aim
of this paper is to present a new approach that accounts for multiple objectives for evaluating risky
investment projects and determining projects risk level. With the proposed simulation based optimization
approach, necessity values for project parameters are determined to reach the expected profitability
of the investment with the minimum initial investment cost. Also, there is an illustrative example
given in this study as an application of the proposed approach.
cannot be certain and really materialized values. It is inevitable that there exists a deviation or gap between
forecasted values and actual values. Thus, project risk level of the proposal should be analyzed
in the assessment phase. Simulation based project evaluation approaches enables to make more reliable
investment decision since they permits including future uncertainty and risk in analyze process. In
addition, many times, project proposals are evaluated with more than one conflicted criteria. The aim
of this paper is to present a new approach that accounts for multiple objectives for evaluating risky
investment projects and determining projects risk level. With the proposed simulation based optimization
approach, necessity values for project parameters are determined to reach the expected profitability
of the investment with the minimum initial investment cost. Also, there is an illustrative example
given in this study as an application of the proposed approach.
Keywords
References
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