How do large corporations make the decision to proceed with a project? What data or metrics do they consider prior to investing billions into a new plant, a new high rise condo, or major I.T. project? Capital budgeting refers to the financial modelling that evaluates the feasibility and compares potential project investments. At the end of the day, … [Read more...]
A project feasibility study is a report that investigates the viability of a project. It seeks to provide its stakeholders with an analysis that results in a go/no-go decision. Feasibility studies are performed in a variety of industries. They are prominent in the oil & gas, mining, or renewable energy industries, or manufacturing industry for new plant … [Read more...]
A cost benefit analysis is a project selection method in which a common metric is used to compare a project's costs and the benefits it provides. It is used in public projects (like road building) or projects where the end product is not purely monetary. The cost benefit analysis is performed by computing the net present value of the project with the net present … [Read more...]
Discounted cash flow is an project investment valuation method whereby future cash flows are discounted by a rate that accounts for the time value of money. It is used to make decisions between various available projects, or to determine the economic feasibility of a project. For example, when a business is expecting revenue of $250,000 next year, the current … [Read more...]
The internal rate of return (IRR) of a project is the expected growth rate of a project investment. It can be compared to the rate of return obtained by investing the money in the stock market or in other projects. Organizations typically calculate IRR to make decisions between several investment alternatives. It is the discount that results in a net present … [Read more...]
Payback period is the length of time required for an investment to recover its capital. It is the amount of time required until the investment is in a break even position. It is generally used for investments that involve a large up front capital outlay, such as the construction of an industrial facility, or development of a software product. The shorter the … [Read more...]
