1 Project Selection. 2 I. Project Selection: Non-Numeric Models Sacred Cow Operating Necessity Competitive Necessity Product Line Extension Comparative.

Slides:

Advertisements

Similar presentations

Principles of Managerial Finance 9th Edition

Advertisements

Chapter 7 Capital Budgeting Processes And Techniques

© 2012 Jones et al: Strategic Managerial Accounting: Hospitality, Tourism & Events Applications 6thedition, Goodfellow Publishers Chapter 14 Capital Investment.

Project Management A Managerial Approach

Hospitality Financial Management By Robert E. Chatfield and Michael C. Dalbor ©2005 Pearson Education, Inc. Pearson Prentice Hall Upper Saddle River, NJ.

Capital Budgeting Processes And Techniques

Capital Investment Decisions

Capital Investment Analysis

ICS 442 Software Project Management

© 2003 McGraw-Hill Ryerson Limited 12 Chapter The Capital Budgeting Decision McGraw-Hill Ryerson©2003 McGraw-Hill Ryerson Limited Prepared by P Chua April.

Project Management: A Managerial Approach

CAPITAL BUDGETING TECHNIQUES

MANAGEMENT OF ENGINEERING PROJECT MANAGEMENT

Capital Budgeting Evaluation Technique Pertemuan 7-10 Matakuliah: A0774/Information Technology Capital Budgeting Tahun: 2009.

Last Study Topics FCF and PV NPV and its competitors The payback Period The book rate of return Internal rate of return.

Do all companies use the same tools to assess investment decisions/proposals? 1.Yes 2.No.

1 Applying Simulation to Decision Problems. 2 Monte Carlo simulation: A simple example Cash inflows Probability outflows Probability ($) (%) ($) (%) 50.

Agenda  Project Management Overview  Selecting Projects  The Aggregate Project Plan.

9-0 Net Present Value and Other Investment Criteria Chapter 9 Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.

1) Project A: Payback Period = $250,000/$75,000 = 3.3 years.

Techniques for selecting projects

Capital Budgeting Net Present Value (NPV)

Capital Budgeting

University of Sunderland CIFM02 Unit 3 COMM02 Project Evaluation Unit 3.

© 2006 John Wiley and Sons, Inc. Project Management: A Managerial Approach Chapter 2 – Strategic Management and Project Selection.

Ch. 2 Strategic Management and Project Selection

Copyright 2012 John Wiley & Sons, Inc. Part I Project Initiation.

Unit 4 – Capital Budgeting Decision Methods

Ch. 2 Strategic Management and Project Selection

Capital Budgeting. Definition Capital budgeting is the planning process used to determine whether a firm's long term investments such as new machinery,

Project Selection Models. Project Selection Project selection is the process of evaluating individual projects or groups of projects, and then choosing.

Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Ltd

CORPORATE FINANCE III ESCP-EAP - European Executive MBA 24 Nov a.m. London Project Appraisal-Dealing with uncertainty I. Ertürk Senior Fellow in.

MEM 612 Project Management Chapter 1 The World of Project Management.

Capital Investment Decisions

EUT443 – Engineering Management Chapter 1 The World of Project Management.

Capital Budgeting.

Chapter 8 Capital Asset Selection and Capital Budgeting.

Northern University Bangladesh© 2006 John Wiley and Sons, Inc. Project Management: A Managerial Approach Chapter 2 – Strategic Management and Project Selection.

IT Project Management MS Sumayya Ajaz Lecture 9. Programme Management Individual projects as components of a programme within the organization. Programme.

FIN 614: Financial Management Larry Schrenk, Instructor.

Confidential & Proprietary Internal Kaplan Use Only. CAPITAL PROJECT ANALYSIS Unit 7.

Project Selection Models 1. 2 Strategic Management and Project Selection Maturity of Project Management Criteria for PS Models Nature of PS Models Types.

BASIC MATHS FOR FINANCE

How Projects Get Started Conducting a Project Assessment 1.

Project Management in Practice Fourth Edition Prepared by Scott M. Shafer, Updated by William E. Matthews and Thomas G. Roberts, William Paterson University.

EUT443 – Engineering Management Chapter 1 The World of Project Management.

Investment decision making. Capital investment Capital investments are usually long term and expensive. Examples of capital investment include: Plant.

1-1 The World of Project Management. 1-2 Projects and their characteristics. Project life cycle. Selection methods. Exercise. Homework: 21, 22, 25, 26.

Chapter 26 Capital Investment Decisions Demonstration Problems © 2016 Pearson Education, Inc.26-1.

Project Management A Managerial Approach

FIN 575 Week 3 Project Proposal Copyright All Rights Reserved By By :

Copyright 2015 John Wiley & Sons, Inc. Part I Project Initiation.

Part I Project Initiation.

Net Present Value and Other Investment Criteria

Cost Benefit Evaluation Techniques

Factors to consider System component costs Methods

Investment Appraisal - ARR

Chapter 12 - Capital Budgeting

Investment Appraisal – Discounted Cash Flow (NPV)

Presentation on Project Selection

Project Management in Practice

Long-Term (Capital Investment) Decisions

ALTERNATIVES TO THE NET PRESENT VALUE RULE

دراسة جدوى مشروعات تفريخ الأسماك (دورة تدريبيـــــــــــــــة)

Project Selection.

Chapter 11 Investment Decision Criteria

Example Exercise 2 Cash Payback Method Cash Payback Method

Project Management: A Managerial Approach 4/e

Capital Investment Decisions

Presentation transcript:

1 Project Selection

2 I. Project Selection: Non-Numeric Models Sacred Cow Operating Necessity Competitive Necessity Product Line Extension Comparative Benefit (E.g. Q-SORT: Projects are Divided into Rated Groups. If a Group Has More than Eight Members, It is Divided into Two Groups. Then Projects within Groups are Ranked).

3 II. Project Selection: Numeric Models Payback Period Initial Fixed Investment / Annual Cash Inflow E.g. $10,000 / $2000 = 5 Years Mean Rate of Return Annual Return / Initial Investment E.g. $3,000 / $10,000 = 0.30

4 II. Project Selection: Numeric Models Present Value (Discounted Cash Flow) 1.In One Year: (Net Present Value)(1+k) = (Future Value) Where k is Interest Rate E.g. ($10,000 or NPV) (1.1) = $11,000 = F 2.In t Years: NPV (1+k) t = F E.g. ($10,000) (1.1) (1.1) = $12,100

5 II. Project Selection: Numeric Models Present Value (Discounted Cash Flow) 3.Solving for NPV: NPV = F / (1+k) t E.g. NPV = $12,100 / 1.21 = $10,000 4.If You Have F’s in Different Years (or Periods) NPV = -A 0 + [F 1 /(1+k) 1 ] + [F 2 /(1+k) 2 ] + Etc. NPV = -$7,000+($5,000/1.1)+($5,000/1.21) NPV = $1,677.68

6 II. Project Selection: Numeric Models Profitability Index (Cost-Benefit) Index = NPV / Initial Investment ( A 0 ) E.g. Index = $1, / $ = 0.24

7 II. Project Selection: Numeric Models Scoring Methods 1.Unweighted 0-1 Factor 2.Unweighted Factor Scoring Example – Project A QualifyNo Qualify S Environmental Impact x 8 Need for Consultants x 3 Impact on Image x 7 Totals2 1 18

8 II. Project Selection: Numeric Models Scoring Methods 3.Weighted Factor Scoring For Each Project i: S i = S i1 W 1 + S i2 W 2 + S i3 W 3 + Etc. E.g. S 1 = (10)(0.5) + (10)(0.3) + (5)(0.2) = 9 Select Projects with Highest Scores (S i ’s)

9 II. Project Selection: Linear Programming Scoring Methods Linear (Integer) Programming Maximize Z = S 1 X 1 + S 2 X 2 + S 3 X 3 + Etc. Subject to: m 1 X 1 + m 2 X 2 + Etc.  M X i = 0 or 1 E.g. Max. Z = 10 X X 2 + 5X 3 s.t. 2X 1 + 5X 2 + 3X 3  7 Workers X 1,X 2,X 3 = 0 or 1

10 Answers Below

11 II. Project Selection: Numeric Models Analysis of Projects Under Uncertainty Primary Source of Uncertainty: Time and Cost We Can Use Monte Carlo Simulation Computer Can Generate Typical (E.g. Normally Distributed) Activity Times and Costs. After 1000’s of Runs a Cost Probability Distribution Can be Generated for Each Proposed Project. ProbabilityCost.3 $

12 Summary Numeric Methods Can Assist in: Project Selection Bidding through Cost Estimation and Computer Software Such as Quickest (Constructive Computing)