Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

The influence of extra projects on overall investment feasibility

The influence of extra projects on overall investment feasibility Purpose – The paper looks at the influence of adding more projects on overall investment feasibility under conditions of uncertainty, and how far into the future the project cash flows should be relied upon, given that the project owner expects a reasonable level of feasibility attached to the investment. Design/methodology/approach – The paper presents a formulation for the feasibility of the multi‐project case under uncertainty. A second order moment analysis method is adopted. Existing theory is extended to take into account the presence of multiple projects with a requirement imposed on feasibility by the project owner. In tandem with the theoretical development, example case study numerical results are presented. Findings – With a conventional deterministic discounted cash flow analysis, the feasibility calculations change little in going from one to many projects. However with uncertainty attached, the feasibility calculations need to be reworked and become more complex, the issue of feasibility becomes less transparent on going from one to many projects, distinct feasibility transition points disappear, and feasibility is found to vary over the projects' time horizons. Practical implications – The need for the analysis given in this paper resulted from an actual investment decision. The paper formulation provides interesting insight into feasibility calculations, and will be of use to practitioners engaged in front‐end project investment risk work. Originality/value – The paper provides original commentary on the feasibility of multiple projects and the time‐variant nature of feasibility. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Management of Property and Construction Emerald Publishing

The influence of extra projects on overall investment feasibility

Download PDF
15 pages

Loading next page...
 
/lp/emerald-publishing/the-influence-of-extra-projects-on-overall-investment-feasibility-Kl86e4UIr6

References (24)

Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1366-4387
DOI
10.1108/13664380810913403
Publisher site
See Article on Publisher Site

Abstract

Purpose – The paper looks at the influence of adding more projects on overall investment feasibility under conditions of uncertainty, and how far into the future the project cash flows should be relied upon, given that the project owner expects a reasonable level of feasibility attached to the investment. Design/methodology/approach – The paper presents a formulation for the feasibility of the multi‐project case under uncertainty. A second order moment analysis method is adopted. Existing theory is extended to take into account the presence of multiple projects with a requirement imposed on feasibility by the project owner. In tandem with the theoretical development, example case study numerical results are presented. Findings – With a conventional deterministic discounted cash flow analysis, the feasibility calculations change little in going from one to many projects. However with uncertainty attached, the feasibility calculations need to be reworked and become more complex, the issue of feasibility becomes less transparent on going from one to many projects, distinct feasibility transition points disappear, and feasibility is found to vary over the projects' time horizons. Practical implications – The need for the analysis given in this paper resulted from an actual investment decision. The paper formulation provides interesting insight into feasibility calculations, and will be of use to practitioners engaged in front‐end project investment risk work. Originality/value – The paper provides original commentary on the feasibility of multiple projects and the time‐variant nature of feasibility.

Journal

Journal of Financial Management of Property and Construction – Emerald Publishing

Published: Jul 25, 2008

Keywords: Probabilistic analysis; Project management; Uncertainty management

There are no references for this article.