Includes all inflows and outflows not just the ones through payback point

Includes all inflows and outflows not just the ones

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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:
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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
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  • Spring '14
  • KimNeedy

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