Normative two-criteria model of Multi-period investment projects analysis

V. N. Mikhno ; G. A. Mikhno ; T. A. Lavrinenko

Vestnik Tverskogo gosudarstvennogo universiteta. Seriâ Prikladnaâ matematika, no. 1 (2019), pp. 50-61

Résumé

The article examines the problem of two-criteria evaluation and selection of multi-period investment projects consistent with the preferences of an investor as the decision-maker. The criteria used are contradictory and measure the degree of achieving conflicting goals – maximizing the capitalization and maximizing the income achieved by the project realization. The relevance of this problem lies in the practical demand for the methods of justifying investment decisions and the insufficient degree of accounting for investor preferences in the known methods. The article puts the axioms of rational investor behavior and the mutual independence of considered preference criteria at the heart of formulating and solving the problem. The article justifies the structure and the algorithm of estimating the parameters of the function of the utility (value) reflecting investor preferences in a two-criteria space of project implications. In accordance with the concept of maximum utility, the choice of the best project in terms of investor preferences is reduced to seeking a project providing the maximum value function. The article provides a demonstrative example of applying the proposed model of choosing projects.

Détail

Keywords: multi-period investment, capitalization level, income level, criteria space, investor preferences, preference independence, two-criteria utility function.