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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › investment decision
Dear sir,
what are the ways of incorporating effect risk and uncertainty on investment decision?
Two common approaches are
1 Weight the various outcomes from a project with the probabilities of occurrence. This produces an amount called the ‘expected value’.
Or
2 Reduce the value of future flows to take account of the difficulty in predicting them accurately. This technoque produces ‘certainty equivalents’.
