Topics: Net present value, Cash flow, Discounted cash flow Pages: 4 (409 words) Published: October 10, 2013

Project Selection:

1.Aligning strategy with projects
2.Project investment criteria
3.Functional assessment

Human resources

Selection Models:

Selection (or screening) models help managers pick winners from a pool of projects. Screening models are numeric or nonnumeric and should have: Realism
Ease of use
Cost effectiveness

Project Screening & Selection Issues:

Risk – unpredictability to the firm
Commercial – market potential
Internal operating – changes in firm operations
Additional – image, patent, fit, etc.

All models only partially reflect reality and have both objective and subjective factors embedded.

Project Selection Methods:

Non-numeric Models:

1.Sacred cow
2.Operating necessity
3.Competitive necessity
4.Product extension
5.Comparative benefit
7.Simplified Scoring Models
8.Analytical Hierarchical Process

1. Checklist Model:

A checklist is a list of criteria applied to possible projects.

Requires agreement on criteria
Assumes all criteria are equally important

Checklists are valuable for recording opinions and encouraging discussion

Does not allow comparison with other potential projects

2. Simplified Scoring Models:

Each project receives a score that is the weighted sum of its grade on a list of criteria.

Scoring models require:
agreement on criteria
agreement on weights for criteria
a score assigned for each criteria

Score = sigma ( Weight x Score )

3. Analytical Hierarchy Process:

The AHP is a four-step process:

1.Construct a hierarchy of criteria and sub criteria
2.Allocate weights to criteria
3.Assign numerical values to evaluation dimensions
4.Scores determined by summing the products of numeric evaluations and weights

Profile Models :

Show risk/return...
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