Abstract:
The application of forecasting techniques as part of project evaluations is an indispensable task as without applying proper forecasting procedure, appropriate financial decision making could not be achieved. The current study attempts to lay down a comprehensive account of the available forecasting techniques that aid a given project with its financial decision-making requirements. Through a comprehensive literature review, it has been found that a number of forecasting techniques are applied in making appropriate financial decisions as part of project evaluation. The technique of “Markov PERT” analysis has recently been used to accurately assess the time of project completion and the cost at completion. It has also been revealed that the application of hybrid algorithms and the use of artificial intelligence is growing for accurate forecasting results. However, it is found that in evaluating a project, the success of the application of various financial forecasting techniques such as NPV, ARR, IRR, Payback Period, Support Vector Machine, Monte Carlo Simulation, S curve and others, essentially depends upon the project nature and environment. It is, therefore, recommended that financial decision making should not only be done based on statistical error margins but only on the reliability of the warning signals as generated by any forecasting techniques.
