Project selection methods

Project Selection Methods

Systems used to evaluate and choose projects based on specific criteria.

Benefit Measurement Methods

Approaches that evaluate financial inflows and outflows, suitable for smaller projects.

Benefit/Cost Ratio

A method that prefers projects with a higher return-to-cost ratio.

Economic Value Added (EVA)

A selection method based on the highest net profit after taxes and expenses.

Scoring Model

A committee-based assessment that scores projects on relevant criteria.

Payback Period

A method that selects projects based on the shortest time to repay costs, with limitations.

Net Present Value (NPV)

The difference between cash inflows and outflows; higher NPV is preferred.

Discounted Cash Flow

A method that accounts for the decreasing purchasing power of money over time.

Internal Rate of Return (IRR)

A profitability measure where projects with higher IRR are preferred, but should not be used alone.

Opportunity Cost

The selection of the project with the lowest opportunity cost.

Constrained Optimization Methods

Techniques suited for complex, long-term projects.

Linear Programming

A method that optimizes resources to minimize costs.

Non-linear Programming

Used when project variables change at non-constant rates.

Integer Programming

Best for scheduling projects with both continuous and discrete activities.

Dynamic Programming

A method that breaks a project into smaller sub-problems for optimal solutions.

Multiple Objective Programming

Considers multiple objectives simultaneously to balance goals.

Expert Assistance

May be required for applying complex project selection models effectively.