Abstract

This paper presents a novel methodology to include the risk when determining the net present value of an investment. More specifically, the risk of cash flows is priced by the delay in the payment of debts not at the initially agreed maturities, but at later dates. To do this, first we recall the classical methods which introduce a certain risk correcting parameter before determining the net present value of the project. The key idea of this new model is to transfer the risk to the time embedded in the expression of the discount function by using a suitable deformation of this parameter. In this way, the risk is measured by the delay in the initially agreed maturity when obtaining the corresponding cash flow. On the other hand, the way to include the risk in a project is based on an adaptation of the Krugman’s curve which describes the relationship between debt maturities and their respective expectations of being obtained. The empirical contribution is based on the use of real data of payment delays corresponding to Spanish companies in 2015. This procedure allows to fit the risk of an investment project from a more realistic perspective and so to determine more accurately its net present value.

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