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ASSESSMENT OF PROJECT RISK

ASSESSMENT OF PROJECT RISK The major features relating to the methodology followed by the Indian corporate to assess the project risk and the relative significance assigned to different risk assessment techniques are summarized below. • The respondent firms use, as...

Decision tree Approach

Decision-tree Approach The Decision-tree Approach (DT) is another useful alternative for evaluating risky investment proposal. The outstanding feature of this method is that it takes into account the impact of probabilistic estimates of potential outcomes. In other...

Normal Probability Distribution

Normal Probability Distribution We can make use of the normal probability distribution to further analyse the element of risk in capital budgeting. The use of the normal probability distribution is enable the decision maker to have an idea of the probability of...

Independent Cash Flows Over Time

Independent Cash Flows Over Time The mathematical formulation to determine the expected values of the probability distribution of NPV for any project is: The above calculations of the standard deviation and the NPV will produce significant volume of information for...

Probability Distribution Approach

Probability Distribution Approach In the earlier part of this chapter dealing with basic risk concepts, we had introduced the use of the concept of probability for incorporating risk in evaluating capital budgeting proposals. As already observed, the probability...