Advertisement

Abstract

In this paper, several uncertainties are considered for investment acceptability decision by IRR method. First, some parameters in weighted average cost of capital (WACC) equation are assumed to be fuzzy numbers, a fuzzy WACC is obtained, and defuzzified by t-norm and t-conorm fuzzy relations. Assuming that WACC is a minimum threshold for minimum attractive rate of return (MARR), fuzzy MARR is determined to be greater than or equals to fuzzy WACC. Finally, by assuming the net cash flows to be fuzzy numbers, a fuzzy IRR formula is obtained, defuzzified by t-norm and t-conorm fuzzy relations, and the results are compared to fuzzy MARR to evaluate the acceptability of a pure and simple investment. This study is an extension of Bas (2008) where t-norm and t-conorm fuzzy relations are considered for the defuzzification of fuzzy IRR formula.

Keywords

Fuzzy WACC fuzzy MARR fuzzy IRR t-norm/t-conorm fuzzy relations 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. 1.
    Bas, E.: Internal Rate of Return of Fuzzy Cash Flows Based on Pessimistic and Optimistic Fuzzy-Relation Approach. In: Proceedings of the 8th International FLINS Conference, Madrid, Spain, September 21-24. Proceedings Series on Computer Engineering and Information Science. World Scientific, New Jersey (2008)Google Scholar
  2. 2.
    Bas, E., Kahraman, C.: Fuzzy Capital Rationing Model. Journal of Computational and Applied Mathematics 224, 628–645 (2009)MathSciNetzbMATHCrossRefGoogle Scholar
  3. 3.
    Bas, E.: Surrogate Relaxation of a Fuzzy Multidimensional 0–1 Knapsack Model by Surrogate Constraint Normalization Rules and a Methodology for Multi-Attribute Project Portfolio Selection. Engineering Applications of Artificial Intelligence (2011), doi:10.1016/j.engappai.2011.09.015Google Scholar
  4. 4.
    Buckley, J.J., Eslami, E., Feuring, T.: Fuzzy Mathematics in Economics and Engineering. Physica-Verlag, A Springer-Verlag Company, Heidelberg, New York (2002)zbMATHGoogle Scholar
  5. 5.
    Carmichael, D.G.: An Alternative Approach to Capital Investment Appraisal. The Engineering Economist 56, 123–139 (2011)CrossRefGoogle Scholar
  6. 6.
    Inuiguchi, M., Ramik, J., Tanino, T., Vlach, M.: Satisficing Solutions and Duality in Interval and Fuzzy Linear Programming. Fuzzy Sets and Systems 135(1), 151–177 (2003)MathSciNetzbMATHCrossRefGoogle Scholar
  7. 7.
    Park, C.S., Sharp-Bette, G.P.: Advanced Engineering Economics. John Wiley & Sons, Inc., New York (1990)Google Scholar
  8. 8.
    Ross, T.J.: Fuzzy Logic with Engineering Applications, International edn. McGraw-Hill, Inc., New York (1995)zbMATHGoogle Scholar
  9. 9.
    Sarper, H., Palak, G., Chacon, P.R., Fraser, J.M.: Probability Distribution Function of the Internal Rate of Return for Short-Term Projects with Some Random Cash Flows and Extensions. The Engineering Economist 55, 350–378 (2010)CrossRefGoogle Scholar
  10. 10.
    Wang, S.-Y., Hwang, C.-C.: An Application of Fuzzy Set Theory to the Weighted Average Cost of Capital and Capital Structure Decision. Technology and Investment 1, 248–256 (2010)CrossRefGoogle Scholar
  11. 11.
    White, J.A., Case, K.E., Pratt, D.B.: Principles of Engineering Economic Analysis, 5th edn. Wiley (2010)Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • Esra Bas
    • 1
  1. 1.Department of Industrial EngineeringIstanbul Technical UniversityMackaTurkey

Personalised recommendations