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Methods for Calculating a Project's Viability

How do you value the financial merits of one project over another? In theory, the investment value models that are used for valuing securities should also be used for valuing capital investments (projects). The problem is that securities are traded in markets like the New York Stock Exchange and NASDAQ. These markets are considered to be efficient for the most part. It is generally accepted that the price (cost) of a security equals its value. There is no efficient market for the buying and selling of projects.

In addition, many projects are predominantly one of a ki...


Cover of Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition


Become familiar with three important factors that are worth considering before initiating a new project or initiative: relevant cash flows, figure of merit, and acceptance criterion.