Assessing Profitability

Abstract

Evaluating profitability1 is central in the choice of concept. Needless to say, project profitability can be proven only retrospectively. But in the front-end phase, profitability may be appraised, mostly on the bases of assumptions and judgement. Hence, there’s often a need for stochastic analyses that can derive meaningful figures for costs and benefits from probability distributions.

Once probabilistic cost figures are available, the next step is to calculate anticipated income to portray profitability. This chapter comprises a brief overview of frequently used cost-benefit criteria and of profitability calculation.