Investment appraisal using quantitative risk analysis

摘要

In the present paper a method has been discussed that can be used when performing an investment appraisal for a fire protection system. Uncertainty concerning probability values are dealt with using second-order probabilities. The decision rule that is used to determine if an investment is profitable or not imply that an weighted average of the different probabilities (and consequence values) are used to calculate the net present value of the investment. If the net present value is positive then the investment is deemed to be profitable otherwise not. The decision is reliable if the major part of the set of plausible net present values are positive. In this context "the major part" is interpreted as more than 95% of the values. A case study, which was performed at a cold rolling mill belonging to Avesta Sheffield, showed that it is possible to apply the method in a real case. The result from that case study was that an investment in a sprinkler system has a net present value of 156.000.000 SEK, and thus is deemed to be profitable.