An integrated multi-criteria decision making methodology for risky investment projects evaluation

The aim of this research is to propose a novel methodology for risky investment projects evaluation. The proposed methodology consists of three main stages. The first stage of the methodology includes opportunity and pre-feasibility studies. The aim of this stage is to give prominence to project ideas which have the highest chance of attaining the goals planned by entrepreneurs and investors. Therefore, in the first stage, the investment projects are classified by using a multi-criteria sorting (MCS) method which does not require a training sample, and takes into account the inherent risk and uncertainty associated with the values of evaluation criteria. This MCS method named as PROMSORT was proposed for financial classification problems. In the scope of this dissertation, this method has been adapted to the investment project evaluation and selection problems.After assigning of the project alternatives to the groups, the second stage of the proposed methodology begins. In this stage, a new net present value (NPV) formulation that eliminates the weakness of using the traditional formulation of NPV has been developed. In uncertain and risky environments, the risky project parameters are determined by probability distributions by using simulation models. For that reason, in the second stage, a computer simulation model for new NPV formulation has been developed by using computer simulation software. Also, the second simulation model has been developed in order to calculate the expected cash flows for each project in each period.The budgets of the enterprises are generally not enough to implement all of the investment proposals which have high expected utility level at the same time. In these cases, the enterprises prefer to implement the investment project proposals at the number allowed by the size of their budgets. Besides the lack of budget, the other reasons of this complexity may be some technical limitations such as earliest and latest start dates and precedence relations.However, in today?s high competitive environments, enterprises have to act well-planned. The first step of acting well-planned is to determine a planning horizon and to predict how much budget to allocate for carrying out investment projects each period over that planning horizon. In this new case, the main objective of enterprises is to maximize the expected utility of all investment projects which are carried out over the planning horizon. In the third stage of the proposed methodology, this type of problem is called as optimal project selection and scheduling problem. The last original contribution of this dissertation is to construct multi-objective mathematical models such as multi-objective linear programming model and fuzzy multi-objective linear programming models in order to solve this problem.