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Techniques For Managing Projects Risk In Capital Budgeting Process

Author

Listed:
  • Karanovic, Goran

    (Faculty of Tourism and Hospitality Management in Opatija, University of Rijeka, Croatia)

  • Baresa, Suzana

    (Faculty of Tourism and Hospitality Management in Opatija, University of Rijeka, Croatia)

  • Bogdan, Sinisa

    (Faculty of Tourism and Hospitality Management in Opatija, University of Rijeka, Croatia)

Abstract

The paper examines capital budgeting process and techniques of risk analysis in the process of selecting optimal project. Corporate manager in process of capital budgeting uses numerous techniques some of them are based on intuition and experience of manager, and some of them are analytic based on sensitive, scenario, decision tree and Monte Carlo method. All methods are used to determinate and to predict risk influence on the projects. Article deals with analytical techniques and real problems that can arise in capital budgeting process. Trough case study in article we analyzed risks that may emerge from different techniques. Conclusion that emerges from analyzing different methods of risk techniques is that only with right combination of these techniques corporate manager could decide correctly to choose optimal capital project.

Suggested Citation

  • Karanovic, Goran & Baresa, Suzana & Bogdan, Sinisa, 2010. "Techniques For Managing Projects Risk In Capital Budgeting Process," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 1(2), pages 55-66.
    • Handle: RePEc:ris:utmsje:0015
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    References listed on IDEAS

    as
    1. Bogdan, Sinisa & Baresa, Suzana & Ivanovic, Sasa, 2010. "Portfolio Analysis Based On The Example Of Zagreb Stock Exchange," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 1(1), pages 39-52.
    2. Mihai BOTEZATU, 2010. "Capital investments in the context of time factor," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 13(1), pages 106-118, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Mnte Carlo; sensitive method; scenario method; decision tree; NPV; discount rate.;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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