Module24 - Post Implementation Analysis Post Implementation...

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Post Implementation Analysis Post Implementation Evaluation Part I
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Key Concepts Last Module: Made final decision (with multiple projects) This Module: Post implementation analysis Just because we made a decision doesn’t mean we can retire!
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Choice Made! Now Track It. 1 Problem (need or opportunity) recognition and definition 2 Generation of Solution Alternatives 3 Development of Feasible Solution Alternative Cash Flows 4 Economic Evaluation of Alternatives, including cases under uncertainty and risk 5 Selection and Implementation of Best Alternative 6 Post-implementation Analysis and Evaluation
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Post-Implementation Analysis Once we make our decision, the capital budgeting process is not over. We must track its progress: Projects “repeat” over time . Maintaining a database of cost information can make estimation much easier “next” time. Dynamic decisions : should a project continue, be encouraged with more support, or be terminated? Must track to consider answers.
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Looking Back Our first concern should be in the evaluation of our estimation procedures. This is accomplished by comparing our estimated cash flows with those that are realized. This error analysis is common in forecasting analysis.
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Error Analysis Define An as our realized cash flow and a tilde to represent our estimated cash flow. If we are at time n, with n +1 realized cash flows, we can measure the error using: Mean Absolute Deviation: Mean Squared Error: MAD = A t - ˜ A t t = 0 n n + 1 MSE = A t - t ( 29 2 t = 0 n n + 1 MAPE = A t - t A t t = 0 n n + 1 × 100%
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Example Henan Mobile Communications Corp. in China gave Nokia Oyj of Finland a $170 million contract to expand its GSM/GPRS network to further increase its customer based, currently at 17 million mobile subscribers. Source: “Nokia Gets $170M GSM Expansion Deal in China,” Dow Jones Newswires , February 15, 2006.
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Example Baseline Assume the $170 million investment occurs at time zero and is expected to be utilized for five years with no salvage value due to technological change.
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Module24 - Post Implementation Analysis Post Implementation...

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