A New Approach for IT Projects Valuation

This paper developed a new framework for valuating IT projects based on real option, Monte Carlo simulation and risk analysis. At first, real option valuation is utilized for evaluating IT projects. In this method, Monte Carlo simulation is employed to evaluate all the possible scenarios of variation and to estimate the corresponding project returns. The output of the Monte Carlosimulations is the probability distribution of the project returns. Then, risk scores are calculated in the fuzzy environment for them. Finally, the best IT project is valued based on a fuzzy utility function. The fuzzy utility of investment for the decision maker is determined by the use of the geometric average of the real option and risk scores.