Continuous Valuation Model for Work-in-progress Investments with Fuzzy Logic Method

Currently, banks and other financing institutions ask for detailed project documentation in order to finance major building projects. Among other requirements, continuous valuation reports are to be provided by investors under the term of building works to prove current Market Value of the project. There is no scientific model for work-in-progress valuation, so appraisers are forced to use subjective judgments’. A credible and objective valuation method should help to minimize banking risk and, as a result, to increase lending activities. In the scientific literature, the fuzzy logic concept has been suggested to utilize for valuation purposes, but until now, it has not been not investigated for work-in-progress situations. Under the term of building, non-defined (“fuzzy”) variables are usable and appropriate to predict the future. In this article, the author will describe and present a valuation model, which - in conjunction with automated project management tool - gives the best estimation of the actual Market Value of the project. The proposed model is based on Discounted Cash Flow (DCF) analysis. The article will also cover a case study to demonstrate the strengths of the model.