From the course: Leading Projects
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Financial analysis of projects
- Project leaders need to understand the costs and benefits when they're investigating their options. In this movie, we'll look at the two most common methods for analyzing the financial benefits of a proposed solution. The two approaches to financial analysis that are used most often are net present value, NPV, and return on investment, ROI. What's useful about the NPV is that you end up with one number. If the number is positive, that's good, you'll make money. And the bigger the number is, the more money you'll make. Calculate the NPV by figuring out how much the project would cost each year, how much it would earn each year, and what you expect the inflation rate will be. Or in more technical terms, NPV adds up discounted cash flows over the life of the project. By adding each year's value together while adjusting for inflation, you estimate how much the project is worth in today's money, the net, or total, present…
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