Study On Project Risk Evaluation And Investment Decision Based On Utility Theory

With the integration of the global economy and China's accession to the WTO, enterprises are faced with increasingly intense competition, the uncertainty in corporation project investment is increasing, and the investment and implementation of projects face more risks. Therefore, when considering the feasibility of investment projects, firstly all factors that lead to the project risk should be understood profoundly, and then the economic interests and the project risk level should be considered at the same time.This paper studies from three aspects, include common factors of project investment, project risk evaluation and project investment decision:(1)The paper analyses common risk factors of project investment leading to project risk and project success or failure, include System and non-systematic risk factors.(2) The paper explores methods and theories of project risk evaluation, and the differences between expectation and utility for project risk evaluation are compared. The commonly used methods of project risk evaluation with expectations theory as a guide measure the uncertainty of risk simply by accumulated a free intermediate variables; But the application of utility theory in project risk evaluation, include ascertaining the risk efficiency and the utility curve and utility function, considers subjective factors of different investors and policy makers, for example, different risk-bearing capacity and risk preferences.(3) Based on analysis of investment decision-making models and index related, the paper establishes a model based on risk evaluation and investment decision. Base on economic index related to project, the paper focus on 01 programming mode in all models. It can be used in investment decision-making with single-index and multi-index; and it also can be used in investment decision-making of single-project and multi-project. Then a new integrated model for decision-making is proposed based on improving the 01 programming model. Making investment decision with this new model can make the risk and interests to a state of equilibrium, and can reflect subjectivity of investors and policy makers too.