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Includes all inflows and outflows not just the ones through payback pointDiscounted cash flows are widely used instead of Payback period. Payback period is less meaningful for longer periods of time 8) Advantage and disadvantage:Advantage:This model has all the necessary information for cash flow Numeric models are flexible. Some of the models can be changed as per the requirements and are flexible. Disadvantage: The model does not estimate the cash flows.The model include present value for short term and generally ignores opportunities in a long run perspective The model with its IRR sometimes makes an error in determining solutions. 10) Project Portfolio Management. This method evaluates and chooses one method which closely aligns with the organization goals. I helps in monitoring projects in an organization Project Portfolio method identifies funds for the organization and best possible ways of rate of return are analyzed Exercise Questions:
2) Average rate of return = Average Annual Profit/Average Investment = $30,000/$200,000.= 15%3)YrCashFlowPV 20%Discounted CashFlow0($75,000)1-750001$20,000 0.83333316666.666672$25,000 0.69444417361.111113$30,000 0.57870417361.111114$50,000 0.48225324112.65432NPV501.54320995) YrCashFlowPV 20%Discounted CashFlow0($65,000)1-650001$20,000 0.83333316666.666672$25,000 0.69444417361.111113$30,000 0.57870417361.111114$35,000 0.48225316878.85802Index1.050273NPV3267.746914Project is Profitable. 6) ProjectScoreCriterionWeightABCABCCost20123204060Risk20231406020Opportunity10213201030Profitability10332303020Sustainability10211201010Safety25123255075Competitiveness