Page 49 - DMGT521_PROJECT_MANAGEMENT

Project Management

Notes Self Assessment

State True or False:
9. The organisation has no informal method of selecting projects.
10. The concept of comparative benefits, if not a formal model, is widely adopted for selection
decisions on all sorts of projects.
11. Decision makers can act on their beliefs about what will be the likely impact on the total
system performance if the new product is added to the line.

12. Capital in an operating necessity project takes precedence over a competitive necessity
project.

3.6 Summary

 An organisation might have dozens of prospective projects vying for limited resources.
 The process of evaluating individual projects or groups of projects for the purpose of
choosing which to implement might include a number of factors.

 Top management might develop a matrix of objectives for projects that are expressly
based on the organisation’s business goals and strategies.
 A project should be assessed for realism, capability and cost.

 One of the biggest decisions that any organisation would have to make is related to the
projects they would undertake.
 The most viable option needs to be chosen, keeping in mind the goals and requirements
of the organisation.
 There are various project selection methods practiced by the modern business
organisations.
 Cost-benefit analysis is used by several organisations to assist them to make their selections.
 In this case the project is suggested by a senior and powerful official in the organisation.
 Certainty means that although future flows must be forecast or estimated, the estimated
amounts will be received at the times they are expected to occur.

3.7 Keywords

Competitive Necessity: Using this criterion, XYZ Steel undertook a major plant rebuilding project
in the late 1960s in its steel bar manufacturing facilities near Chicago.
Cost Benefit Analysis: Cost-benefit analysis is used by several organisations to assist them to
make their selections.

Discounted Cash Flow: It determines the net present value of all cash flows by discounting them
by the required rate of return.
Discounted Cash Flow Method: The future value of a project is ascertained by considering the
present value and the interest earned on the money.
IRR: The rate of return received from the money.
Operating Necessity: If a flood is threatening the plant, a project to build a protective dike does
not require much formal evaluation, which is an example of this scenario

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