Theoretical and Applied Economics
No. 7 / 2011 (560)
Characteristics of Criteria for Selecting Investment Projects under Uncertainty
Bucharest Academy of Economic Studies
Adrian ENCIU
Bucharest Academy of Economic Studies
Dorina POANTA
Romania Banking Institute
Abstract. Within financial theory and practice, there are used five main criteria for selecting investment projects: the net present value (NPV) criterion, the internal rate of return (IRR) criterion, the return term (RT) criterion, the profitability ratio (PR) criterion and the supplementary return (SR) criterion. The assay will emphasize several new properties of said indexes for investment assessment, having as starting point the hypotheses of (approximately) normal repartition of cash-flows generated by an investment project. The obtained results point to the fact that the NPV indexes (the analysis of this criterion was carried out in the article “The NPV Criterion for Valuing Investments under Uncertainty”, Daniel Armeanu, Leonard Lache, Economic Computation and Economic Cybernetics Studies and Research no. 4/2009, pp. 133-143), IRR, PR, RT and SR register normal repartitions, therefore simplifying the investment analysis under economic uncertainty, by the capacity of building confidence intervals and assessing probabilities for the inferior limits of said investment assessment indexes.
Keywords: internal rate of return; cash flow; topical rate; uncertainty; normal repartition; confidence interval; mathematical expectation; square mean deviation of the net present value.
Contents
- Characteristics of Criteria for Selecting Investment Projects under Uncertainty
Dan ARMEANU
Adrian ENCIU
Dorina POANTA
- Online Services Management Support
for an Intelligent Locality
Lorena BĂTĂGAN
Adrian POCOVNICU
- The Meanings of “Made in Romania”
among the Romanian Consumers
Cătălin Mihail BARBU
- Forms and Strategies of the Banks to Enter on a Foreign Market
Nicoleta HURDUC
Alin NIŢU
- The European Recovery Economic Plan and Quality
of Public Finances – Instruments for Monitoring
and Improving Fiscal and Economic Systems
Mircea SOROCEANU
Carolina Daniela LUPAŞCU (SOROCEANU)
- An Optimization of the Risk Management
using Derivatives
Ovidiu ŞONTEA
Ion STANCU
- Towards to the Respiritualization
of the Economics
Constantin POPESCU
Mihaela COMĂNESCU
- Financial Crisis from the Trust and Loss Aversion
Perspective in Emerging Romanian Capital Market
Antoniade-Ciprian ALEXANDRU
Nicoleta CARAGEA
- The Contribution of the Neo-Schumpeterian Approach
to the Development of the Economic Theory:
Emphasis on the Meso-Economic Level
Radu HERMAN
Remus AVRAM
- Dobrogea as Romanian Tourism Micro-destination
Aurelia-Felicia STĂNCIOIU
Nicolae TEODORESCU
Anca-Daniela VLĂDOI
Ion PÂRGARU
Daniel MOISE