ETvärde

ETvärde is a term used in decision analysis and economics to denote a measure of the value of outcomes accumulated over a specified time horizon. It captures the idea that the value produced by a decision or process is distributed across future periods and is often adjusted for time preference and risk.

Two common forms are discrete ETvärde and continuous ETvärde. Discrete ETvärde is defined as ETvärde = sum from t=0 to T of V_t divided by (1 + r) raised to the t, where V_t is the value realized in period t and r is the discount rate. Continuous ETvärde is ETvärde = integral from 0 to T of V(t) times e raised to the minus r t dt, with V(t) the value at time t. In both cases, V_t or V(t) represents the expected or realized value in each period.

Relation to other concepts: when values are known with certainty, ETvärde is closely related to net present value. If probabilities are involved, ETvärde can refer to the expected discounted sum, i.e., the expectation of the discounted future values.

Application and interpretation: ETvärde is used in project appraisal, policy analysis, environmental economics, and risk assessment to compare options by their accumulated value over time. It allows analysts to incorporate time preference and, when needed, uncertainty into the valuation.

Example: a project yields cash flows of 100, 120 and 130 in the next three years with a discount rate of 5%. The discrete ETvärde is 100/1.05 + 120/1.05^2 + 130/1.05^3, which is approximately 316.1.

Limitations include reliance on forecast accuracy, the choice of discount rate, and the need to include non-financial values in V(t) if relevant. See also: Net present value, Expected value, Time value of money.