Ontwikkeling van 'n lewensvatbaarheidsmodel vir die ondersteuning van die investeringsbesluit

Abstract

This study evaluated the investment decision as applied by Karbochem (Sasolburg) a division of Sentrachem. A computer model was developed to assist the decision-makers in future feasibility studies. Both the evaluation of the investment decision and the development of the computer model were based on a thorough literature study. The conclusions and recommendations can be summarised as follows: To base decisions on single-point decision criteria like IRR or NPV and then lift the required hurdle rate for the subjectively evaluated risk leading to non-optimal allocation of capital. The objective of a firm, to maximise shareholders wealth, is therefore not met. The evaluation of risk under the mentioned objective of the firm could however be met by the following method. Develop risk profiles for all the investment input variables and use the supplied computer model to simulate the expected return with the assosiated risk profile. The expected return could be measured with NPV or IRR and the risk measured by the standard deviation from the expected return. The decision can then be taken based on the decision-makers, accepted risk level. A standard deviation lower than the expected return means that there is one chance out of six of the real result falling below this value. The importance of the risk-return relationship must however be emphasised, the lower the acceptable risk the lower the return. The use of the portfolio concept to lower risk is further recommended. The portfolio concept is the evaluating of a project's risk as the contribution to the total risk of a group of projects, or the total assets of the firm.