The Evaluation of Risk in Business Investment

Front Cover
 The Evaluation of Risk in Business Investment
 Copyright Page
 Table of Contents
 List of Tables
 List of Figures
 Preface
 CHAPTER 1. BASIC PRINCIPLES OF INVESTMENT APPRAISAL
 1.1. Introduction
 1.2. Measuring Costs and Benefits
 1.3. Performance Measures
 1.4 The Discount Rate
 1.5. Adjustments to the Discount Rate
 1.6. Summary
 References
 CHAPTER 2. SOME PROCEDURES FOR QUANTIFYING RISK
 2.1 Introduction
 2.2 Sensitivity Analysis
 2.3 The Limitations of Sensitivity Analysis
 2.4 Probability Distributions and Risk Profiles. 2.5 Analytic approaches towards determining a risk profile2.6 Sampling from a Probability Distribution and Risk Simulation
 2.7 Comparison of Analytic and Simulation Approaches
 2.8 Risk Evaluation and Modern Financial Management Theory
 2.9 Summary
 References
 CHAPTER 3. FORECASTING AND THE ASSESSMENT OF SUBJECTIVE PROBABILITY DISTRIBUTIONS
 3.1 Introduction
 3.2 Making Estimates --
Basic Approaches
 3.3 Estimating Uncertainty
 3.4 The Validity of Subjective Probability Distributions
 3.5 Methods for Estimating Subjective Probability Distributions
 3.6 Experimental Evidence
 3.7 Biases. 3.8 Accuracy3.9 Optimistic and Pessimistic Estimates
 3.10 Summary
 References
 CHAPTER 4. DEALING WITH DEPENDENCE IN RISK SIMULATION
 4.1 Introduction
 4.2 The Importance of Dependencies
 4.3 Evaluating the Importance of a Dependence
 4.4 The Level of Disaggregation
 4.5 Isolating Sources of Uncertainty
 4.6 Sampling Schemes Suggested In The Literature
 4.7 Proposal for a Sampling Scheme
 4.8 The Growth-Rate Problem
 4.9 Summary
 References
 CHAPTER 5. USING THE RESULTS FROM A SENSITIVITY ANALYSIS
 5.1. Introduction
 5.2. Carrying out the Sensitivity Analysis. 5.3. Results for a Simple Linear Model5.4 Case Studies Investigated
 5.5. Approximating to the Standard Deviation of the Performance Measure
 5.6. Approximating to the Mean of the Performance Measure
 5.7. The Importance of Different Features of the Input Variables
 5.8. Potential Pitfalls
 5.9. Reducing the Number of Probability Assessments to a Minimum
 5.10. Summary and Conclusions
 References
 CHAPTER 6. SEQUENTIAL INVESTMENT DECISIONS
 6.1. Introduction
 6.2. Decisions and Outcomes
 6.3. The Decision-Tree Methodology
 6.4. The Expected Value of Perfect Information
 6.5. Bayesian Analysis. 6.6. Discussion of the Decision-Tree Methodology6.7. Abandonment Options
 6.8. Summary
 References
 CHAPTER 7. RISK AND RETURN --
SOME THEORETICAL IDEAS
 7.1. Introduction
 7.2. Utility Theory
 7.3. The Quadratic Utility Function
 7.4. Portfolios of Projects
 7.5. The Capital Asset Pricing Model
 7.6. Capital Investment and the Shareholder
 7.7 Summary
 References
 CHAPTER 8. CASE STUDY
 8.1. Introduction
 8.2. The Model
 8.3. The Initial Analyses
 8.4. The First Simulations
 8.5. Further Analyses
 8.6. Summary and Conclusions
 References.