Eliminate projects that have Rate of Return less than the MARR if available

Eliminate projects that have rate of return less than

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Eliminate projects that have Rate of Return less than the MARR (if available). Consider the project with lowest investment requirements. Then select the project with the second lowest investment requirements. Calculate incremental ROR (ROR delate between two projects). If ROR delta <= MARR, select project with lowest investment requirements. Else select the one with higher investment requirements. 7 IE 492 Engineering Economics
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PROJECT SELECTION & DECISIONING (CONT.) Other Relationships Between Projects: This is generally the realty! A project is dependent on other project / tasks / activities / investment in the company? Also, an acceptance of one project may also mean acceptance of the other in order to realize the expected value of the investment. Some project may also be financially dependent. In such cases, related projects should be treated as ‘ONE INVESTMENT’ for evaluation purposes. 8 In reality there are other constraints on project selection, and comparison to MARR is not the only evaluating factor. Example: company strategic plan, fiscal priorities, funding criteria, regulatory requirements etc. IE 492 Engineering Economics
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