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Project Selection Methods - Coggle Diagram
Project Selection Methods
Decision
Start the project?
Not to start the project?
Methods
1 method
Not Enough
Combination :check:
Groups
Comparative approach
Benefit Measurement Method
Economic Models
Internal Rate of Return (IRR)
Complicated Calculation
Bank interest rate
IRR-->
Project
Choose Project with
IRR
Payback Period
Time needed
Repay invested money
PBP-->
Project
PBP will NOT be sole criteria
Read question carefully!!
Cost-Benefit Analysis
Benefit cost ratio= Total benefit/Total cost
Its Revenue and NOT Profit above
Present Value
Money Loses it's value!
PV=Value of money Today!
FV=Value of money in Future
Net Present Value
NPV of Revenue-NPV of Cost
Select a project
Highest
IRR
Shortest
PBP
Highest
Benefit-cost ratio
Highest
NPV
Highest
PV
Scoring Models
Peer Review
Murder Board
Mathematical approach
Constrained Optimization Methods
Dynamic Programming
Multi-Objective Programming
Integer Programming
Linear Programming
Accounting Terms
Opportunity cost
Cost of NOT selecting the other project
Sunk cost
Money that can't be recovered
Gone
Actual cost spent till now
Don't consider to decide
Whether to continue
Or Scrap the project
Economic Value Added (EVA)
Profit
Provided by the Project
To the Company
Law of diminishing Returns
Working Capital
Money
Company can invest
Investment
Depreciation
Losing value over time
Straight line Depreciation
Losing Same value every year
Accelerated Depreciation
