Abstract
Net present value is a very common criterion in capital budgeting processes. Usually, uncertainty is treated by means of probability theory and net cash flows are included in the model as random variables. Nevertheless, the lack of accuracy in estimation of future net cash flows does not always follow a random variable but a fuzzy one. In this article Fuzzy set theory has thus been used as a tool in determining the net present value of an investment project. The cash flows and the rates of discount are viewed as fuzzy numbers. Two models are developed to study the isolated effects of each one of these variables on net present value calculations. A third model develops the joint effect of cash flows and the rates of discount. It is concluded that this approach is simpler in its process and assumes fewer hypotheses about the behaviour of the related variables than traditional models.
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