Fuzzy Real Investment Valuation Model for Giga-Investments, and a Note on Giga-Investment Lifecycle and Valuation

Very large industrial real investments are different from financial investments and from small real investments, even so, their profitability is commonly valued with the same methods. A definition of a group of very large industrial real investments is made, by requiring three common characteristics. The decision support needs arising from these characteristics are discussed and a summary of existing methods to value and to provide decision support for large industrial investments is presented. A model built specifically to support investment decisions of very large industrial real investments and a numerical application of the model are presented. The model is discussed and commented. A note is made on an observation regarding the giga-investment lifecycle and its effect on giga-investment valuation.Large industrial investments; Profitability analysis; Fuzzy corporate finance; Capital Budgeting

A knowledge based system for valuing variations in civil engineering works: a user centred approach

There has been much evidence that valuing variations in construction projects can lead to conflicts and disputes leading to loss of time, efficiency, and productivity. One of the reasons for these conflicts and disputes concerns the subjectivity of the project stakeholders involved in the process. One way to minimise this is to capture and collate the knowledge and perceptions of the different parties involved in order to develop a robust mechanism for valuing variations. Focusing on the development of such a mechanism, the development of a Knowledge Based System (KBS) for valuing variations in civil engineering work is described. Evaluation of the KBS involved demonstration to practitioners in the construction industry to support the contents of the knowledge base and perceived usability and acceptance of the system. Results support the novelty, contents, usability, and acceptance of the system, and also identify further potential developments of the KBS

Application of the American Real Flexible Switch Options Methodology A Generalized Approach

The paper deals with the inclusion of flexibility in financial decision-making under risk. It describes the application of the real options methodology with the possibility of sequential multinomial decision-making. The basic intention is to describe and apply a generalized approach and methodology of the flexibility modeling and valuation based on multiple choices and non-symmetrical switching costs under risk. The stochastic dynamic Bellman optimization principle is explained and applied. The optimization criterion of the present expected value is derived and used. Likewise, an option valuation approach based on replication strategy and risk-neutral probability is applied. An illustrative example of the application of the real multinomial flexible non-symmetrical switch options methodology is presented for three chosen modes. The option flexible values are computed. The usefulness, effectiveness, and suitability of applying the generalized flexibility model in company valuation and project evaluation is verified and confirmed. The significance of applying the generalized methodology in transition market economies is discussed and verified.financial options; real options; Discrete Binomial Model; pricing; stochastic dynamic Bellman Optimization Principle; switch options

Flexibility in Investments: Exploratory Survey on How Finnish Companies Deal with Flexibility in Capital Budgeting

Flexibility is an important issue when investments are being planned and valued. How flexibility inherent in investments is utilised and exploited is, therefore, of great importance to the accuracy of the plans and the valuation. This paper describes an exploratory survey, done with leading Finnish companies, exploring the use of Real Option Valuation (ROV), and the methods that Finnish corporations use to take flexibility into consideration, when planning and valuing investments. We found that real options exist in Finnish investments, but there are very few companies that have an established methodology of identifying, categorizing, or valuing them. We also found that Finnish managers have mixed views about the value of flexibility in investments. Very few Finnish managers seem to be aware of research done in the field, but most seem to have an intuitive understanding of how different variables affect the value of flexibility in an investment.flexibility; real options; capital budgeting

Organic farming and multicriteria decisions: An economic survey

Organic food production is a sphere where decision making is multi-facetted and complex. This applies to producers, political decision makers and consumers alike. This paper provides an overview of the economic methods that can aid such multi criteria decision making. We first provide an outline of the many different Multi-Criteria Analysis (MCA) techniques available and their relative advantages and disadvantages. In addition, theoretical and practical problems related to the use of Cost-Benefit Analysis (CBA) and MCA respectively are briefly discussed. We then review the MCA literature on case studies on organic farming. Based on this review we provide directional markers for future research where MCA may possibly be applied and adapted in order to provide useful knowledge and support for decision makers in the context of organic farming

An alternative approach to firms’ evaluation: expert systems and fuzzy logic

Discounted Cash Flow techniques are the generally accepted methods for valuing firms. Such methods do not provide explicit acknowledgment of the value determinants and overlook their interrelations. This paper proposes a different method of firm valuation based on fuzzy logic and expert systems. It does represent a conceptual transposition of Discounted Cash Flow techniques but, unlike the latter, it takes explicit account of quantitative and qualitative variables and their mutual integration. Financial, strategic and business aspects are considered by focusing on twenty-nine value drivers that are combined together via “if-then” rules. The output of the system is a real number in the interval [0,1], which represents the value-creation power of the firm. To corroborate the model a sensitivity analysis is conducted. The system may be used for rating and ranking firms as well as for assessing the impact of managers’ decisions on value creation and as a tool of corporate governance.Firms’ evaluation, fuzzy logic, expert system, rating, acquisition, sensitivity analysis

Fuzzy Logic and Its Uses in Finance: A Systematic Review Exploring Its Potential to Deal with Banking Crises

The major success of fuzzy logic in the field of remote control opened the door to its application in many other fields, including finance. However, there has not been an updated and comprehensive literature review on the uses of fuzzy logic in the financial field. For that reason, this study attempts to critically examine fuzzy logic as an effective, useful method to be applied to financial research and, particularly, to the management of banking crises. The data sources were Web of Science and Scopus, followed by an assessment of the records according to pre-established criteria and an arrangement of the information in two main axes: financial markets and corporate finance. A major finding of this analysis is that fuzzy logic has not yet been used to address banking crises or as an alternative to ensure the resolvability of banks while minimizing the impact on the real economy. Therefore, we consider this article relevant for supervisory and regulatory bodies, as well as for banks and academic researchers, since it opens the door to several new research axes on banking crisis analyses using artificial intelligence techniques

FUZZY COMPARATIVE CONCORDANCE ANALYSIS. Proposal and evaluation by a case study

In this paper it is proposed a fuzzy multiple attribute analysis, that we have called comparative concordance, as a help instrument to the decision-making process in an environment of lack of precise information as it generally is the decision-making in regional planning. Through an application to the selection of proceeding programs of the Environmental Plan of Andalusia, 1995-2000, it will be compared to other methods.fuzzy sets, multiple attribute decision, environmental planning