A Fuzzy Mid-Point Based Decision-Support Method for the Assessment of Investments and Companies

Abstract

[eng] In decision-making, we face a situation where we have to decide whether it is worth performing an investment or not, based on a multitude of variables. The Net Present Value (NPV) indicates the profit that our investment will produce over a series of time periods within a fixed time horizon. Its computation begins with certain data from which we can obtain a cash-flow for each time period under consideration. This study will focus on the variables involved in the aforementioned computation that can take values within an interval of possibilities whose end-points are their pessimistic forecast (PF) and their optimistic one (OF). Now, we are in front of infinite different possible forecasts and the expert in charge needs to determine which data is more appropriate among them in order to make the final decision. The objective of this study is to introduce an analytical technique based on the use of L-fuzzy sets, aggregation functions and mid-points to select one forecast among the aforesaid infinite range. This methodology incorporates a penalization, fixed following an analytical procedure and thus reducing subjectivity, for the elapsed time and for the discrepancy between PF and OF in order to generate the NPV. Finally, the methodology is tested by applying it a five-year hotel assessment where real data is considered. Here, it is illustrated that the proposed methodology could be appropriate for the assessment of investments and companies.