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C722 - module 8
Project Management
Term | Definition |
---|---|
project selection model criteria | realistic, capable, flexible, easy to use, low cost, comparable |
model 1 - realistic | Accurately reflects the way the organization does business |
model 2 - capable | Uses factors that are relevant to the organization |
model 3 - flexible | The model should provide accurate measures across a reasonable range of conditions |
model 4 - easy to use | Provide results in a reasonable amount of time. Results should be easily understood by the decision makers |
model 5 - low cost | The costs of gathering data and running the model should be low relative to the scale of the project |
model 6 - comparable | The model should be usable across a range of projects such that the outcomes of the model can be used to compare projects. |
non-numeric selection methods | these focus on selection criteria that are not limited to traditional numeric performance measures (return on investment [ROI], profit, revenue, etc.) |
competitive necessity | the decision of whether to approve or disapprove the project is based on whether implementing the project will ensure the viability of the company in the competitive market |
operating necessity | evaluates a project based on whether it will ensure ongoing operations with the understanding that not executing the project will result in operations being interrupted |
sacred cow | These projects are often created to satisfy the expectations of the leader with little regard for the project’s viability or contribution to strategic or operational needs |
checklist model | uses a series of questions to evaluate each potential project. Each project would be analyzed using the same set of questions, and then the answers to the questions would be compared to determine whether a project is accepted or rejected |
numeric selection criteria | use financial and other quantitative measures to drive decision-making |
scoring criteria | can be quantitative or qualitative in form but must be answered using a scale. The format of the scale can vary, but for simplicity, you can use a scale of 1 to 10 with 1 being weakest and 10 being strongest. |
weighed factor scoring model | senior management assigns a weight to each criterion, which places some emphasis on selected criteria when calculating the total project score |
time value of money | suggests that money is worth more to an organization now than in the future. |
opportunity cost | The opportunity cost of executing a specific project is the benefit that the next best alternative use of the money would have provided |
payback period | calculates the amount of time required to earn back the cost of doing the project |
internal rate of return (IRR) | evaluates potential projects as if they were financial investments, and calculates the rate of return for a project |
net present value (NPV) | is a financial measure of the total future benefits of a project minus the costs of the project |
future net cash flows | means that in order to evaluate a project, you need to know the costs (cash outflows) and benefits (cash inflows) for the entire working life of the project outcome |
discounted cash flows | Companies often identify the interest rate based on their cost of borrowing money or their required rate of return on investment, but either way, the rate is determined by the company. |