The Experts below are selected from a list of 135258 Experts worldwide ranked by ideXlab platform
Lorenzo Peccati - One of the best experts on this subject based on the ideXlab platform.
-
sensitivity analysis in Investment Project evaluation
International Journal of Production Economics, 2004Co-Authors: Emanuele Borgonovo, Lorenzo PeccatiAbstract:Abstract This paper discusses the sensitivity analysis of valuation equations used in Investment decisions. Since financial decision are commonly supported via a point value of some criterion of economic relevance (net present value, economic value added, internal rate of return, etc.), we focus on local sensitivity analysis. In particular, we present the differential importance measure (DIM) and discuss its relation to elasticity and other local sensitivity analysis techniques in the context of discounted cash flow valuation models. We present general results of the net present value and internal rate of return sensitivity on changes in the cash flows. Specific results are obtained for a valuation model of Projects under severe survival risk used in the industry sector of power generation.
Petar Jovanovic - One of the best experts on this subject based on the ideXlab platform.
-
application of sensitivity analysis in Investment Project evaluation under uncertainty and risk
International Journal of Project Management, 1999Co-Authors: Petar JovanovicAbstract:Abstract This paper treats Investment decision-making under uncertainty and risk. Some of the methods used for Investment decision-making under uncertainty and risk are presented: Break-even Analysis, Sensitivity Analysis, Theory of Games and Decision Making Theory. Sensitivity Analysis is given special consideration, and one of the procedures of its application in Investment decision making under uncertainty and risk is shown.
Shuhsien Liao - One of the best experts on this subject based on the ideXlab platform.
-
a fuzzy real option approach for Investment Project valuation
Expert Systems With Applications, 2011Co-Authors: Shuhsien LiaoAbstract:The main purpose of this paper is to propose a fuzzy approach for Investment Project valuation in uncertain environments from the aspect of real options. The traditional approaches to Project valuation are based on discounted cash flows (DCF) analysis which provides measures like net present value (NPV) and internal rate of return (IRR). However, DCF-based approaches exhibit two major pitfalls. One is that DCF parameters such as cash flows cannot be estimated precisely in the uncertain decision making environments. The other one is that the values of managerial flexibilities in Investment Projects cannot be exactly revealed through DCF analysis. Both of them would entail improper results on strategic Investment Projects valuation. Therefore, this paper proposes a fuzzy binomial approach that can be used in Project valuation under uncertainty. The proposed approach also reveals the value of flexibilities embedded in the Project. Furthermore, this paper provides a method to compute the mean value of a Project's fuzzy expanded NPV that represents the entire value of Project. Finally, we use the approach to practically evaluate a Project.
-
Investment Project valuation based on a fuzzy binomial approach
Information Sciences, 2010Co-Authors: Shuhsien LiaoAbstract:The typical approaches to Project valuation are based on discounted cash flows (DCF) analysis which provides measures like net present value (NPV) and internal rate of return (IRR). DCF-based approaches exhibit two major pitfalls. One is that DCF parameters such as cash flows cannot be estimated precisely in an uncertain decision making environment. The other one is that the values of managerial flexibilities in Investment Projects cannot be exactly revealed through DCF analysis. Both of them would have significant influence on strategic Investment Projects valuation. This paper proposes a fuzzy binomial approach that can be used in Project valuation under uncertainty. The proposed approach also reveals the value of flexibilities embedded in the Project. Furthermore, this paper provides a method to compute the mean value of a Project's fuzzy NPV. The Project's fuzzy NPV is characterized with right-skewed possibilistic distribution because these flexibilities retain the upside potential of profit but limit the downside risk of loss. Finally, this paper discusses the value of multiple options in a Project.
Emanuele Borgonovo - One of the best experts on this subject based on the ideXlab platform.
-
sensitivity analysis in Investment Project evaluation
International Journal of Production Economics, 2004Co-Authors: Emanuele Borgonovo, Lorenzo PeccatiAbstract:Abstract This paper discusses the sensitivity analysis of valuation equations used in Investment decisions. Since financial decision are commonly supported via a point value of some criterion of economic relevance (net present value, economic value added, internal rate of return, etc.), we focus on local sensitivity analysis. In particular, we present the differential importance measure (DIM) and discuss its relation to elasticity and other local sensitivity analysis techniques in the context of discounted cash flow valuation models. We present general results of the net present value and internal rate of return sensitivity on changes in the cash flows. Specific results are obtained for a valuation model of Projects under severe survival risk used in the industry sector of power generation.
Axel Pierru - One of the best experts on this subject based on the ideXlab platform.
-
Investment Project valuation : A new equity perspective
2009Co-Authors: Denis Babusiaux, Axel PierruAbstract:We suggest a new approach to calculating a Project's net present value, termed the "displaced equity method". Based on a straightforward formula, it analyzes a Project partially financed with debt from the perspective that every year the amount of outstanding debt displaces an equivalent amount of equity that otherwise would be tied up in the Project. Although they represent distinct shareholders' perspectives, the displaced equity method and the equity residual method lead to the same Investment decision. Every year, the Project's value calculated with the displaced equity method is equal to the sum of the Project's debt and equity values. In practice, when the schedule of expected outstanding debt amounts is known, using the displaced equity method is an easy way to estimate the Project's net present value.
-
capital budgeting Investment Project valuation and financing mix methodological proposals
European Journal of Operational Research, 2001Co-Authors: Denis Babusiaux, Axel PierruAbstract:A firm using a discount rate defined at the corporate scale as a Weighted Average Cost of Capital (WACC) may have to value Projects subject to a different tax rate from the one used to calculate its discount rate. Moreover, to determine the economic value of a Project, the WACC and Arditti-Levy methods need to be adjusted if the firm allocates to this Project a loan representing proportionally more (or less) than the fraction corresponding to the target debt ratio defined by the firm for Projects in the same class of risk. We first propose a method which corresponds to the adjustment of standard WACC calculations. The formulation adopted (“generalized ATWACC method”) has the advantage of being independent of any consideration related to debt ratios. We then develop a consistent adaptation of the Arditti-Levy method (“adapted BTWACC method”), but it does not possess the simplicity of that of the generalized ATWACC method.
-
Capital Budgeting, Investment Project Valuation and Financing Mix : Methodological Proposals
2000Co-Authors: Denis Babusiaux, Axel PierruAbstract:The results presented here are part of research work originally based on the problem concerning the valuation of Investment Projects subject to specific fiscal rules, such as those encountered in the upstream oil industry. More precisely, the first question addressed was how to determine the economic value of an Investment Project partly financed by borrowing, when the revenue from the Project is subject to a different tax rate from the one used to calculate the discount rate, and when the loan allocated to the Project is different from the one corresponding to the target debt ratio defined by the company for this type of Projects. We propose a method which is, in fact, more general in scope. It is presented in the first part of this article and corresponds to the adaptation of classic ATWACC calculations. A simple answer is to add each year, to the Project cash flow, an after tax loan cost differential (negative or positive). The formulation adopted (“generalized ATWACC method”) is independent of any consideration related to debt ratios. The second question addressed here is the use of the Arditti-Levy (BTWACC) method, the one most commonly used in the Exploration-Production branch of the oil industry. While the method is appropriate to deal with for complex specific tax rates, it needs to be adjusted if the company allocates to a Project a loan representing proportionally more (or less) than the fraction corresponding to its consolidated debt ratio. A suitable approach is developed here. However the formulation, by further complicating a method which in any case cannot be used without precaution, does not possess the simplicity of that of the generalized ATWACC method, and the latter should therefore be preferred in all situations.
