Fuzzy Payback Period of Investment into Modernization of Production Network

Abstract

The difference between the result of managerial calculations and reality can be largely attributed to uncertainty. In the case of discounted payback period (DPP), it concerns uncertain capital expenditures, positive cash flows, and discount rates. To resolve this problem the intervals of possible values instead of uncertain point values should be regarded. This idea is projected in defining the significant points of the input parameters for the DPP calculation from which the significant points of the fuzzy payback period (FPP) in the sense of triangular fuzzy numbers (TFN) are derived. For the TFN ranking, the weighted method is used. The FPP numerical formula thus becomes flexible in terms of the possibility of expressing faith in the incidence rate of the input data. The existing literature omits to regard negative weights for positive and/or negative cash flows in the FPP calculation. In the application, the relations are applied to the quantification of the FPP interval of possible values, by means of which the investment plan for the modernization of the lignite power plant is evaluated.