Study On The Probability Analysis In Economic Evaluation For Industrial Investment Project

Uncertainty analysis is the important content in economic evaluation and investment decision-making of projects. It is able to make investor acknowledge the risk of project in all-sided, and efficiently control the variety of factors which affect the project mostly by taking uncertainty analysis, and then to enhance scientific decision-making and to lessen the loss of investment. Probability analysis can take risk evaluation of project all-sidedly in the common methods of uncertainty analysis, but it is difficulty to conclude the probability distribution of uncertainty factors' variety which affect project. So it is not applied widely in real operation. The most application principle on decision-making of probability analysis result is Maximum Expected Principle. But in 1738 Daniel Bernoulli brought forward the St. Petersburg Paradox to explain that the Expected Value Hypothesis couldn't figure the action of people's decision-making fully, and further brought forward the Theory of Expected Utility to direct people's decision-making objectively. This paper combined the study of predecessor and use PERT predicted method and technology of Monte-Carlo Simulation to get the probability distribution of project's random NPV, and to use the Theory of Expected Utility to get Expected Utility Value for decision-making to make decision of project.Firstly, this paper compares the common methods to uncertainty analysis based on being definite the elemental conception of project economic evaluation. According the comparison the paper consider that it make the decision-maker acknowledge the project's risk all-sidedly by probability analysis. It is the most important analysis method to investment decision-making. But the mill-run probability analysis and decision-making principle have many limitations.Then, based on the basic principle of Expected Utility Theory, it introduces the determinate method of Utility Function and seeks the Value of Expected Utility in the light of decision-maker's curve of Utility Function.And then, it especially introduces the theoretical basis of PERT predicted method and the technology of Monte-Carlo simulation, it ascertain the random variables of the model by analysing the uncertainty factors of economic effect index. And it brings forward random NPV model in the light of basic NPV model. Using the theory of Expected Utility to evaluate the risk of project by the probability distribution of project's NPV.At the end, it proofs how to use the model of random NPV and Theory of Expected Utility to evaluate the project. Because of bulky calculation, it develops program by VFP6.0.