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                  458                               Corporate Finance                      BRILLIANT’S



                        TECHNIQUES OF DECISION MAKING UNDER RISK AND UNCERTAINTY
                                  [añH$ VWm A{ZpíMVVm Ho$ A§VJ©V {ZU©` H$aZo H$s VH$ZrH|$

                   Q.53. What are the techniques of risk analysis? / [añH$ EZm{b{gg H$s VH$ZrH|$ Š`m h¢?
                                                           OR
                         What is risk adjusted discount rate method? Explain its merits and demerits.
                         [añH$ ES>OñQ>oS> {S>ñH$mC§Q> aoQ> ‘oWS> Š`m h¡? BgHo$ JwU VWm Xmofm| H$m dU©Z H$s{OE&

                                                           OR
                         Explain the certainty equivalent method of adjusting risk. What are its advantages?
                         ES>OpñQ>¨J [añH$ H$s gQ>}ÝQ>r BŠ`ydob|oQ> ‘oWS> g_PmB`o& BgHo$ bm^ Š`m h¢?
                                                           OR
                         Explain the concept of sensitivity analysis. What are its merits and demerits?
                         g|{g{Q>{dQ>r EZm{b{gg H$s AdYmaUm g_PmB`o& BgHo$ JwU VWm Xmof Š`m h¢?

                  Techniques for Risk Analysis                [añH$ EZm{b{gg H$s Q>opŠZŠg
                      Risk analysis is one of the most complex    [añH$ EZm{b{gg, BÝdoñQ>_|Q> {S>grOZ Ho$ g~go O{Q>b
                  aspects of investment decision. Different tech-  H$m`m] _| go EH$ h¡Ÿ& EH$ àmoOoŠQ> go Ow‹S>r hþB© [añH$ H$m
                  niques have been suggested for analysis of risk  {díbofU H$aZo H$s {d{^ÝZ Q>opŠZŠg gwPm`r JB© h¢Ÿ& `o
                  associated  with a  project. These  techniques
                  have been drawn from the fields of mathemat-  Q>opŠZŠg _¡Wo_o{Q>Šg, bm°{OH$, BH$moZm°{_Šg Ed§ gm`H$m°bm°Or
                  ics, logic, economics and psychology. They are  Am{X joÌm| go br JB© h¡Ÿ& `o {ZU©`H$Vm© H$mo [añH$ Ed§
                  helpful for the decision maker to make decision  A{ZpíMVVm H$s pñW{V _| {ZU©` boZo _| ghm`H$ hmoVr h¢Ÿ&
                  under conditions of risk and uncertainty. How-
                  ever, no single technique can be deemed as best  hmbm§{H$ H$moB© ^r EH$ Q>opŠZH$ g^r pñW{V`m| _| gd©loîR>
                  in all situations.                          Zht H$hr Om gH$VrŸ&
                      Following are the popular techniques of     [añH$ Ho$ _yë`m§H$Z Ho$ {bE {ZåZ{b{IV Q>opŠZŠg
                  risk evaluation:                            bmoH${à` h¡…
                      (A) Conventional Techniques                 (A) H$Ýd|eZb Q>opŠZŠg

                      1. Pay-Back Period (PBP)                    1. no-~¡H$ nr[a`S (PBP)>
                      2. Risk-Adjusted Discount Rate (RADR)       2. [añH$-ES>OñQ>oS> {S>ñH$mCÝQ> aoQ> (RADR)
                      3. Certainty Equivalent Approach (CEA)      3. gQ>}ÝQ>r BpŠddoboÝQ²>g AàmoM (CEA)
                      4. Sensitivity  Analysis                    4. gopÝg{Q>{dQ>r EZm{b{gg
                      5. Financial Break-Even                     5. \$m`ZopÝe`b ~«oH$-B©dZ
                      (B) Statistical Techniques                  (B) ñQ>o{Q>pñQ>H$b Q>opŠZŠg

                      1. Probability Distribution Approach        1. àmo~o{~{bQ>r {S>ñQ´>rã`yeZ EàmoM
                      2. Simulation Analysis                      2. {g_wboeZ EZm{b{gg
                      3. Decision-Tree Approach                   3. {S>grOZ-Q´>r EàmoM
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