Does cultural economics affect country’s competitiveness?

Abstract

The use of the Certainty Equivalent Method allows for the modification of cash flows in the event of risk diagnosis after determining these flows and for emerging conditions. Given the limits surrounding economic forecasting, it is reasonable to assume that cash estimates during the early years of the project are more accurate than they are in later years. The Certainty Equivalent Coefficient (CEC) is defined as the ratio of the confirmed cash flow in the year to the uncertain cash flow in the same year, and the value of the certainty coefficient ranges from zero in the case of high risk level (uncertainty), and a true one in the case of certainty. The certainty equivalent method compensates for risks in general, and therefore it is appropriate to discount all the adjusted cash flows by means of the certainty equivalent at the risk free rate of return (Treasury Bills). All investment evaluation models are based on Assumptions that can be made to reduce the problem of uncertainty surrounding the estimation of the components of the value of the project. The conditions of uncertainty are the conditions that control all investment decisions, and there is no doubt that this fact is consistent with the nature and characteristics of investment. Under conditions of uncertainty, the analyst can know the cash flows of the investment through the probability distribution, and as a result, the dispersion of the probability distribution of those flows is the one that expresses the risks. Risk is the possibility that realized cash flows will deviate from expected cash flows. Since risks are an inherent component of all investment decisions, it is necessary to study it alongside the expected return from this investment.

Keyword : Certainty Equivalent Method, equivalent coefficient, investment, Economy