Page 173 - DMGT521_PROJECT_MANAGEMENT

Project Management Ginni Nijhawan, Lovely Professional University

Notes Unit 10: Measuring Project Profitability

CONTENTS
Objectives
Introduction

10.1 Pay Back Period
10.2 Accounting Rate of Return
10.2.1 Decision Rule

10.3 Net Present Value
10.3.1 The Discount Rate
10.4 Internal Rate of Return
10.4.1 Uses
10.5 BCR Method

10.5.1 Calculating the Incremental Benefit-Cost Ratio
10.6 Other Assessment Methods
10.6.1 Net Present Value

10.6.2 Discounted Payback Period
10.6.3 Profitability Index
10.6.4 Internal Rate of Return
10.7 Summary
10.8 Keywords

10.9 Review Questions
10.10 Further Readings

Objectives

After studying this unit, you will be able to:

 Define PayBack Period
 Discuss about Accounting Rate of Return
 Describe about NPV
 Explain about Internal Rate of Return

 Discuss the assessment of various methods

Introduction

As a cost means a different thing to different people (in a given context), therefore, it is obvious
that profitability would also be sensitive to these variations. For example, we have “Gross
Margin”, “Operating Margin”, and “Contribution Margin” to assess the profitability from

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