An approach is presented for evaluating corporate project decisions in the context of shareholder value. Properly calculated, project expected monetary value (EMV) represents pre-tax EMV for the investor. Calculating after-tax shareholder value requires, principally, adjusting for tax on distributed project earnings.
Change in the certain equivalent (CE) of an investor's portfolio measures true project value to the investor. The difference between CE and EMV is shown to be minor, especially for marginal projects and when most of the risk is unique to the project. Companies wishing to maximize shareholder value can therefore apply the EMV decision rule, with confidence, as a nearly-optimal decision policy.