PROJECT MANAGEMENT

LESSON 4 – Project Selection

PhD.Vu Tuan Anh

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 Cost Benefit Analysis
• Financial feasibility
• Principles
– Pareto improvement criteria
• The project should make some people better off without
making anyone worse off.
– Hicks-Kaldor test
• The aggregate gains of the project should exceed aggregate
losses.
– Willingness to pay test
• To determine how much your clients are prepared to pay for
your product

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Project Selection

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Numeric Methods – Payback Period 1/2

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Numeric Methods – Payback Period 2/2

5
Return on Investment (ROI)

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Net Present Value (NPV) 1/2

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Net Present Value (NPV) 2/2

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 Internal Rate of Return (IRR) 1/7

IRR or DCF is the value of the discount factor when the NPV is zero

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Internal Rate of Return (IRR) 2/7

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Internal Rate of Return (IRR) 3/7

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Internal Rate of Return (IRR) 4/7

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Internal Rate of Return (IRR) 5/7

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Internal Rate of Return (IRR) 6/7

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Internal Rate of Return (IRR) 7/7

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NPV – Variable Interest Rates

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Scoring Models

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 Break even Analysis
Break even point = Fixed cost / Contribution per unit

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Project Lifecycle – Cash-flow

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