Profitability and Risk Analysis for Investment Alternatives on C-R Domain

This paper investigates a method for evaluating profitability and risk for multiple investment alternatives, for both cases of consistent return over a planned period and fluctuating return year by year. The paper first examines a method for evaluating a single alternative from the viewpoint of profitability and safety. Then it proceeds to the evaluation of multiple mutually exclusive alternatives, out of which the best one is selected. The paper proposes C-R domain, which comprises initial investment and annual return on each of horizontal and vertical axes. On this domain, expected values of net present profit and annual mean profit are represented. Then the procedure for analyzing and evaluating profitability and risk is discussed, and the validity of the proposed method is examined by using numerical examples.