A SIMULATION BASED APPROACH FOR AN INVESTMENT PROJECT EVALUATION UNDER UNCERTAIN AND RISKY ENVIRONMENTS

• Main Authors: Özgür YALÇINKAYA, Özgür ARMANERİ
• Format: Article
• Language: English
• Published: Anadolu University 2010-06-01
• Series: Anadolu University Journal of Science and Technology. A : Applied Sciences and Engineering
• Subjects: Decision making under risk; Investment project evaluation; Simulation; Response surface methodology; Desirability functions
• Online Access: http://btd.anadolu.edu.tr/index.php/BTDA/article/view/8

Under high uncertainty and risky environments, the future estimations related to project proposalscannot be certain and really materialized values. It is inevitable that there exists a deviation or gap betweenforecasted values and actual values. Thus, project risk level of the proposal should be analyzedin the assessment phase. Simulation based project evaluation approaches enables to make more reliableinvestment decision since they permits including future uncertainty and risk in analyze process. Inaddition, many times, project proposals are evaluated with more than one conflicted criteria. The aimof this paper is to present a new approach that accounts for multiple objectives for evaluating riskyinvestment projects and determining projects risk level. With the proposed simulation based optimizationapproach, necessity values for project parameters are determined to reach the expected profitabilityof the investment with the minimum initial investment cost. Also, there is an illustrative examplegiven in this study as an application of the proposed approach.