Creation of Optimal Performance of the Investment Project

Abstract

The selection of an investment project is seen as a problem of multi-criteria decision-making. In this paper, a decision-maker uses six attributes i.e. criteria most used by the international companies in practice (net present value, internal rate of return, payback period, accounting rate of return, operating profit margin and return on equity).Individual utility functions are made for each attribute separately and the global utility function as a weighted sum of individual utility functions. For each criterion a final set of arranged pairs i.e. points of utility is determined based on the decision-maker’s assessments. Then, the points obtained are approximated by the utility function.Finally, the optimization issue solved in order to obtain the optimal performance of the selected project according to decision-maker’s opinion. The negotiation procedure enables the offered performances to approach optimal performance of the selected project aimed at decision-maker and investor reaching an agreement.