Models and Indicators for Risk Valuation of Direct Investments
Economic Computation and Economic Cybernetics Studies and Research, Vol. 43, Issue 3, 2009, p. 69-75
7 Pages Posted: 20 Dec 2012
Date Written: September 1, 2009
Abstract
Abstract. Classical techniques for the valuation of direct investments projects take risk into account only incidentally. In these models, the risk is taken into account by the discount rate: higher is the risk, higher is the discount rate. As long as the discount rate is right estimated, indicators – Net Present Value (NPV), payback period, profitability index, etc. – will be relevant. Modern techniques eliminate some of the inconveniences. The purpose of this study is to make a comparative analysis between the results obtained based on classical techniques and modern techniques of valuation.
Keywords: Direct Investments, Net Present Value, Traditional techniques, Monte Carlo Technique, NPV frequency distribution
JEL Classification: G31
Suggested Citation: Suggested Citation