Review of Fuzzy Numbers and its Application in Capital Budgeting

A fuzzy number is an extension of a regular number in the sense that it does not refer to one single value but rather to a connected set of possible values. Whereas, capital budgeting is the planning process used to determine whether an organisation’s long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing. The purpose of this study is to review the concept of one, two and ndimensional fuzzy numbers and investigate the application of fuzzy numbers in financial field specifically in capital budgeting problem. There are five capital budgeting techniques usually used in practices, such as revenue per one dollar, payback period, net present value(NPV), net future value(NFV), and the modified of internal rate of return(MIRR) methods. In this research both, classical and fuzzy approach are used in order to evaluate the project as mentioned above. The research will also focus on the application of special case of trapezoidal
fuzzy numbers, triangular fuzzy number. At the end of this research the comparison of classical and fuzzy methods are discussed according to five capital budgeting methods. The result of this study provides the alternative way in financial field to evaluate the profitable project to invest.