Feasibility Analysis of Investment Projects with Fuzzy Data

Abstract

In an uncertain economic decision environment, the knowledge of experts about discounting cash flows is confronted with a lot of ambiguities. Inexact parameters like cash flows and interest rates are usually estimated based on statistical techniques, expected values and fuzzy theory. In this study, by combining the fuzzy theory and Monte Carlo simulation, a method is presented for feasibility analysis of the investment projects using net present value and internal rate of return techniques with fuzzy data. The methods provided in litreture have several gaps. Firstly, some of these methods are based on specific fuzzy numbers (triangular and trapezoidal); secondly, they consider life of project and duration of investment as deterministic values or discrete fuzzy numbers. However, in many real problems, cash flows are in the form of fuzzy numbers with different shape and also project life is considered as continuous fuzzy number. The Method is presented in this paper can be used for cash flows, interest rates and life of project without any restrictions on shape of fuzzy numbers as discrete or continuous fuzzy number. Computational efficiency of the proposed method is compared with other methods by solving several examples. The results show the accuracy and efficiency of the proposed method.

Keywords

• feasibility analysis
• fuzzy theory
• monte carlo simulation
• fuzzy net present value
• fuzzy internal rate of return