APPLICATION OF AHP AND PROMETHEE METHODS FOR RANKING THE PROFITABILITY OF INVESTMENT PROJECTS

Abstract

Making a decision about which project is the most profitable is not an easy task, especially when it comesto investments that require large investments. In practice, there are a large number of methods that are applied in order tomake the right decision. The aim of this paper is to show, through empirical analysis, the application of AHP and PROMETHEEmethods as extremely effective when deciding on the best alternative location for the construction of a mini-hydroelectric powerplant. In order to demonstrate the application of these methods and the process of choosing the most profitable project, usingthese methods, real data obtained by the investor, who has three alternative locations for the construction of a mini-hydroelectricpower plant, was used. First, an adequate discount factor, calculated net present value, Internal rate of RETURN project anddynamic investment payback period were selected, in order to then apply the AHP calculation, and then the PROMETHEEmethod in the Decision Lab 2000 program, based on all previously calculated indicators. The combination of these methodsshowed which of the projects is the most profitable and which should be implemented. The very application of these methodsalso showed us that several methods should be used before the final decision is made, in order to choose the most profitablealternative for the investor.