Fuzzy Capital Budgeting Using Fermatean Fuzzy Sets

Abstract

Investment projects are mostly evaluated by capital budgeting techniques to measure their profitability. The parameters used in capital budgeting such as future cash flows, interest rate and useful life involves high uncertainty due to the lack of information for the future environment. Since the uncertainty involved in forecasting the parameters is mostly in high levels, fuzzy set theory could be used in the determination of capital budgeting parameters to handle uncertain information in the analyses. Fermatean fuzzy sets are one of the most recent extensions of fuzzy set theory which are capable to handle higher levels of uncertainties by assigning fuzzy parameters from a larger domain. In this paper, fuzzy capital budgeting techniques that are fuzzy net present worth, fuzzy net future worth and fuzzy net annual worth are extended using fermatean fuzzy sets. An illustration for the calculations is also presented.