Investment cost estimates and investment decisions
bikaqiu70 添加于 2010-5-30 23:35
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作 者
Emhjellen K 摘 要
When evaluating new investment projects, oil companies traditionally use the discounted cashflow method. This method requires expected cashflows in the numerator and a risk-adjusted required rate of return in the denominator in order to calculate net present value. The capital expenditure (CAPEX) of a project is one of the major cashflows used to calculate net present value. Usually the CAPEX is given by a single cost figure, with some indication of its probability distribution. In the oil industry and many other industries, it is a common practice to report a CAPEX that is the estimated 50/50 (median) CAPEX instead of the estimated expected (expected value) CAPEX. In this article, we demonstrate how the practice of using a 50/50 (median) CAPEX, when the cost distributions are asymmetric, causes project valuation errors and therefore may lead to wrong investment decisions with acceptance of projects that have negative net present values.-
详细资料
- 文献种类:期刊
- 期刊名称: Energy Policy
- 期卷页: 第30卷 第2期 91-96页
- ISBN: 0301-4215
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