Professional Documents
Culture Documents
03-01
Chapter 3 Learning Objectives
After completing this chapter, students will be able to:
● Explain six criteria for a useful
project-selection/screening model.
● Understand how to employ checklists and simple
scoring models to select projects.
● Use more sophisticated scoring models, such as the
Analytical Hierarchy Process.
● Learn how to use financial concepts, such as the
efficient frontier and risk/return models.
Realism
Capability
Flexibility
Ease of use
Cost effectiveness
Comparability
16
Profile Models
Show risk/return options for projects.
X7
X6
Maximum
Desired Risk
Criteria
X2 selection as
axes
Risk
X4 X5
Efficient Frontier
X3
Rating each
project on
X1
criteria
Minimum Return
Desired Return
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
Figure 3.4 03-17
Efficient Frontier
Figure 3.5
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 03-18
Financial Models
Based on the time value of money principal
● Payback period
● Net present value
● Internal rate of return
● Options models
Higher NPV
values are better!
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall FIGURE 3.6 GE’s Tollgate Process 03-27
GE Tollgate Review Process Flow Map
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall Figure 3.8 03-30
Keys to Successful
Project Portfolio Management
❖Flexible structure and freedom of
communication
❖Time-paced transition
➢Unpromising projects
➢Scarce resources