Project Economics

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Evolution of Valuation Techniques

Project Economics is done by various valuation techniques. The evolution occur because of the need of valuation techniques that represent the real market expectation.

Commonly, the project economic done by practitioners  is limited only on static NPV, sensitivity and scenario analysis. Based on this conventional techniques, they make decision on their project. This traditional approach seems incompatible to the current environment.

The existence of high uncertainty in the project investment, which requires reliable valuation techniques to improve investment decision making.

The modern techniques such as monte carlo simulation, decision tree and real options  are considered as the advance techniques that can meet the above requirement.

In the modern technique, rather than become a barrier to investment, the uncertainty of the project may even be an opportunity to obtain the growth potential of the project.

Flexibility management strategy in the face of changing circumstances in the future should be taken into consideration when making an investment decision at this time.

Based on our experience, we believe we can move from conventional to modern zone as the technology and knowledge has developed rapidly.

More About Real Options

More About Market Based NPV (MBV)