Application of sensitivity analysis to university investments :

Abstract

The concept of Sensitivity Analysis: is not a new idea. The real world We. are living in is full of uncertainty and risks'. A world whose future occurrences we are in most cases unable to predict. Permanent confrontation of institutional investors with this increasing complexity of nature, together with the need to overcome it, forces financial analysts to continually postulate future project cash flows in order to get adapted. Therefore, one is compelled to predict because he/she needs to undertake an appropriate management' action with certainty. The only clear certainty is- the past while investment problems relate to the future only. The university investment portfolio suffers the dilemma of predetermining the future dynamics of project investments. Sensitivity Analysis provides the solution to the lack of any possibility to predict the future project events and occurrences. Its every clear that university investments decision making never takes place under the certainty but rather uncertainty and risk. Chapter one presents the objectives and scope of the study as well as the likely benefits of the study to the university. The study aims at analysing university investments. An intensive literature review relating to Sensitivity Analysis methods was carried out in chapter two of this report. The methods that were used to undertake the study are presented in chapter three. The methodology includes methods of data collection and analysis. The discussions of results of the study are in chapter four. The level of university investments was determined. Mathematical methods of Sensitivity Analysis were used; mainly Return on Capital Employed, Profitability index, Net Present Value and Sensitivity Margins. An investment system based on the selected project appraisal methods was developed. The web application was coded using php and java script programming languages. The scripts are hosted by a WAMP Sever. Using both hypothesis and classical data via a default browser, the system was tested and verified. The system can be relied upon by any investments analyst. Chapter five includes the conclusions and recommendations of the research. However, we still do not have- appropriate quantitative methods and systems today 10 provide us with' optimal investment decisions in circumstances. of uncertainty. This continuously calls for Further analysis and research.