Includes all inflows and outflows not just the ones

 Includes all inflows and outflows not just the ones through payback point
 Discounted 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)
Yr
Cash
Flow
PV 20%
Discounted Cash
Flow
0
($75,000
)
1 -75000
1 $20,000
0.83333
3
16666.66667
2 $25,000
0.69444
4
17361.11111
3 $30,000
0.57870
4
17361.11111
4 $50,000
0.48225
3
24112.65432
NPV 501.5432099
5)
Yr
Cash
Flow
PV 20%
Discounted Cash
Flow
0
($65,000
)
1 -65000
1 $20,000
0.83333
3
16666.66667
2 $25,000
0.69444
4
17361.11111
3 $30,000
0.57870
4
17361.11111
4 $35,000
0.48225
3
16878.85802
Index
1.05027
3
NPV 3267.746914
Project is Profitable.
6)
Project Score
Criterion Weight A B C A B C
Cost 20 1 2 3 20 40 60
Risk 20 2 3 1 40 60 20
Opportunity 10 2 1 3 20 10 30
Profitability 10 3 3 2 30 30 20
Sustainability 10 2 1 1 20 10 10
Safety 25 1 2 3 25 50 75
Competitiveness