Calculate return on investment and net present value for project alternatives. ROI and NPV are tools that project leaders should use to understand the financial implications of project options. Financial analysis of projects using ROI and NPV can enable improved decision making and higher value results.
- Project leaders need to understand…the cost 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 years value together…while adjusting for inflation,…you estimate how much the project is worth in today's money,…the net, or total present value.…
Since NPV calculates the value…of the project as a monetary value,…the higher the NPV is for an option,…
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- Defining the vision
- Documenting the project scope
- Investigating potential options
- Conducting a SWOT analysis
- Selecting a course of action
- Resolving issues
- Building trust with transparency
- Managing project plans
- Identifying risks
- Changing processes
- Helping people transition
Skill Level Intermediate
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