Firm Projects, NPV and Risk
  An investor is estimating net present value of a firm project and performs risk analysis. Usually it is created portfolio hierarchies and make comparison of variants of project based on these hierarchies. Then one finds that portfolio which corresponds to the particular needs of individual groups within the firm. We have formulated a new type of NPV analysis based on the fact that normal distribution of NPV is observed for some projects in some industries. The expected risk of the project is given by variance, in which there is the standard deviation of the year n cash flow, the standard deviation of the investment I in the time zero, the correlation coefficient of the year n cash flow deviation from the average and of the investment I at time zero deviation from the mean investment at time zero, the correlation coefficient of the year n cash flow deviation from the average and of the year n' cash flow deviation from the average. The aim function of the investor into the project was found. The investor is characterized by the constant A. The larger constant A the larger preference is given to the project NPV and the larger acceptable risk of the project, and vice versa. We have found that there are contributions in which we have the aim-function-like contribution to the aim function, which is discounted and in which the risk of the n-th year risk is discounted in the second order. Further there is aim-function-like contribution to the aim-function which comes from the initial investment I and its risk. 
Jana Hudakova and Ondrej Hudak