The randomized method of estimating the net present value of construction projects efficiency

Abstract

The research presented in this article is a significant extension of data for company management boards, enabling them to make the right investment decisions at a very preliminary stage of investment preparation. The randomized method of estimating the net present value of construction projects efficiency allows to assess the profitability of projects under random implementation conditions. The probability and severity of disturbances are estimated. The primary initial data are randomized and the randomized probabilistic indicator of the net present value of project efficiency is calculated. Its values hovers around 1. Values larger than 1 mean that the project is profitable. Values lesser than 1 suggest stoppage of the implementation. As a supplement of the efficiency analysis the expected overall revenue, the expected total cost and the expected gross profit are calculated. All specified quantities are estimated for the actually expected and for the exceptionally notably favourable and extremely difficult implementation conditions. The method allow also estimation the risk of overall revenue in the range [1,0] and the risk of total cost in the range [0,1]. The changes of risk values in these ranges for the consecutive comparative values are presented in charts of revenue and cost risk and results table. Highlights Randomized method of estimating the net present value of construction projects efficiency unlike the others that have been published in this field of research, allows to take into account the impact of threats on the course and results of the project. The rules of sustainable development can be better taken into account. The method allows reliably evaluate the value and accuracy of the efficiency estimation.