Research on Analytical Model of the Risk-Based Economic Evaluation

It is important to carry out the economic evaluation for a project before the project investment. However, when risk factors are considered, the crisp traditional method such as Internal Rate of Return (IRR) could be difficult competent for the economic evaluation. In this paper, based on the IRR method, a new model is discussed in order to estimate the random changes of risk elements how to transfer and influent the indicators of economic evaluation. The total differential method is used to establish an analytical model of economic evaluation indicator. According to the implicit function theorem, the partial derivative, that is, the coefficients of risk elements transfer can be acquired. Furthermore, the probability distribution of economic evaluation indicator can be inferred by the risk elements. Finally, the practicability and the feasibility of the method is proved by a simple example.