chapter  11
Markov chains and investment analysis
Pages 14

This chapter departs from the preceding chapters on investment analysis in the presence of uncertainty, by giving an alternative method for establishing the present worth, feasibility, internal rate of return and payback period of a capital investment where the analysis variables of interest rate, cash flows and investment lifespan are uncertain. The chapter complements the other chapters in Part II. For the same assumptions, the results of this chapter’s approach are the same as for that in the preceding chapters, but the approach provides additional insight into discounted cash flow (DCF) analysis under uncertainty. The method is useful for people doing investment analysis and for looking at the risks associated with investment.