Professional Documents
Culture Documents
GROUP 1
What is a Project?
A project is an investment activity where we expend
capital resources to create a producing asset from which we can expect to realize benefits over an extended period of time.
Cannot make decisions Cannot be held responsible for decisions Do not produce results exactly analogous to reality
Competitive Necessity
Comparative Benefits Existing Product Line Extension
Numeric Models
Financial models Payback period Return on investment Net present value Internal rate of return
Scoring models
repay its initial fixed investment. The time period is usually expressed in years and months. It reduces the projects exposure to risk and uncertainty by selecting the project that has shortest payback period.
Return on investment
This method first calculates the average annual profit,
which is simply the project outlay deducted from the total gains, divided by number of years the investment will return. outlay using following equations:
Avg annual profit= Total gains- total outlay No. of years Return on investment= Avg annual profit x 100 Original investment
money.
There are two basic DSF techniques that can model this
effect,
to compare two projects with different investment and cash flows profiles.
direct comparisons
It allows for inflation and escalation
Scoring Models
This is also called factor model It simply lists a number of desirable factors on a project
selection proforma along with coloumns for selected and not selected.
The factors can be weighted columns can be added to increase
the scores of important factors while reducing the scoring of the less important.
The factors can be weighted simply 1 to 5.